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The  Bargain  llieory 


of  Wages 


A  Critical   Development  from  the  Ilistoric 

Theories,  together  with  an  Examination  of 

certain    Waives    l^^ictors  :    the    Mo1)ility    of 

Labor,  Trade    L'nionism,  and   the  Methods 

of   Indnstrial  Remuneration 


By 
John  Davidson,  M.A.,  D.  I^hil.  (Edin.) 

Pr..l'c-s-,or   i.f    I'olincJ    I-',.  nii,nny   in    the   T  iiiversily    n( 
Nrw    Urunswlck 


$ 


New  ^'ork  ,111(1   T,nn(i(Tn 

C"i.   V.   Putnam's    Sc^ns 

tiiir   ,Viiu(l;ribocI;cv    pirss 

1898 


Copyright,   1898 

BY 

G.  P.  PUTNAM'S  SONS 
Entered  at  Stationers'  Hall,  London 


Ube  fluikhcibochcr  Iprcss,  IHcw  }I?Och 


..±1. 


■■  rMjroRMA 
;iAnn\HA 


PREFACE. 


SOMETHING  like  an  apology  seems  due  from  a 
writer  who  ventures  to  add  an  essay  on  the 
Wages  Question  to  the  already  enormous  number 
of  essays  and  treatises  on  that  well-worn  subject ; 
but  the  writer  has  found  the  lack,  for  the  purposes 
of  teaching  advanced  students,  of  such  a  book  as 
he  has  endeavored  to  prepare.  There  is  no  treatise 
presenting  in  a  fairly  compact  form  the  problems 
of  wages  which  it  seems  desirable  to  bring  before 
the  attention  of  such  students.  The  systematic 
treatises  and  text-books  in  economics  necessarily 
give  but  scant  treatment  to  the  problem  of  the 
e\-()lution  of  the  theor\'  of  wages;  and  the  mon- 
ographs on  the  wages  (juestion  are.  in  general,  too 
pojemiccd  and  one-sided  to  be  suited  even  for  ad- 
winccd  class  work. 

The  i)resent  essa\-  is  the  outcome  of  the  attempts 
of  the  writer,  during  fwc  years,  to  anal\-7.e  the  wages 
(juestion,  historically  as  well  as  theoreticalK-.  He 
began  witli  the  theor}"  presented  b\'  the  late  Presi- 
dent Walker  in  his  U'di^rs  O/usZ/c//,  but  was  soon 
forced  to  gi\'e  as  a  suj^jjlement  an  exposition  of  the 


iv  Preface. 

history  of  wages  theory  ;  and  gradually  came  to  find 
that  the  theories  were  not  mutually  antagonistic  but, 
in  a  sense,  complementary.  A  study  of  the  Aus- 
trian theory  of  value  showed  him  how  it  was  possible 
to  reconcile  these  divergent  theories  ;  and  TJie  Bar- 
gain TJicory  of  Wages  is  the  result. 

The  comparative  absence  of  references  is  in  part 
due  to  the  fact  that  quotations,  etc.,  were  inserted 
in  his  lecture  notes  during  vacation  study,  and  that 
he  had  no  opportunity  at  the  time  of  writing  to 
verify  them.  He  has,  therefore,  judged  it  best  to 
omit  such  references  as  he  could  not  verify.  The 
woes  of  a  scholar  in  exile  he  had  better  keep  to  him- 
self ;  but  the  inadequacy  of  the  historical  parts  of 
the  essay,  of  which  the  writer  is  fully  conscious,  may 
be  partly  excused  in  one  who  is  some  four  hundred 
miles  from  any  library  even  half  as  good  as  his  own. 

My  obligation  to  Prof.  Taussig's  Wages  a)id  Capi- 
tal in  the  chapter  on  the  Wages  Fund,  and  generally 
to  Mr.  Cannan's  Proeliietion  and  Distribution,  and  to 
Dr.  Smart's  Studies  in  Eeonomies,  is  great  and  obvi- 
ous ;  and  I  owe  many  obligations  which  it  is  not 
possible  so  definitely  to  acknowledge.  Acknowledg- 
ment is  due  to  the  courtesy  of  many  correspondents, 
personally  unknown,  who  have  taken  much  trouble 
in  obtaining  information  for  me;  and  in  particular 
to  Mr.  Ochiltree  Macdonald  and  the  Hon.  Robert 
Drummond  of  Nova  Scotia;  to  Mr.  Stavart  of  St, 
John's,  Newfoundland  ;  to  Miss  Jean  Davidson  of 
hxlinburgh  ;  to  Prof.  Nicholson,  who  read  the  essay 
in  manuscript  and  by  many  helpful  suggestions  en- 


Preface.  V 

ahled  iiic  to  correct  sonic  of  the  disadvantages  of 
isolation  ;  to  my  colleague,  I'rof.  Stocklc}-,  for  assist- 
ance in  i)re[)aring  tiie  manuscri])t  for  the  press;  and 
to  iny  wife,  who  drafted  the  diagrams  and  assisted 
in  the  preparation  of  the  index. 

Tin,    UMVKKSnV  of   NkW    liKCNSWHK, 


vk 


CONTENTS. 


ClIAPTKR   I. 
The  Subsisikxcp:  Thforv 

CIIAITHR    II. 
The  Wages-Flm)    Thkorv   . 

CHAP  IKK    III. 

The  Produc  rivi  rv-oF-LAi!OR  'J'}!1()kv 

ciiArrKR  IV. 
The  P)Aru.\i.\   Theorv  of  \\  acis 

CIIAITKR    V. 
'JTiK   Moi;iLrrv  of   Laiior 

CILM'TKR    \I. 
The   Mobieitv  of    Lahor  ^G'/z/mv/o/^  . 

CHArrER   VII. 
Trade-Uxioxs  as  a  ^^^\G^.^   I'acior 


PAGE 

I 


41 


79 


127 


174 


199 


^54 


CIIAI'Il'.R    \III. 
'I'hi     Methods    he    Ixdi;- iri  \i.    Rfmexera  iiox 

A>    A     W  \(-.ES    I-"  \C  IMR  ,  .  .  .       281 

vii 


THE  BARGAIN  THEORY 
OF  WAGES. 


CHAPTER   I. 


THE   SUliSISTEN'CE    THEORY. 


THE  threat  historical  theories  of  wages  correspond 
in  their  order  and  in  their  character  with  the 
stages  in  the  dc\'eh)[)nient  of  hibor  from  the  disap- 
pearance of  shi\'er\'  and  serfchmi  to  the  rise  of  real 
freedom.  Although  legal  shu'cry  and  serfdom  had 
disappeared  in  hnigland  centuries  before  the  Indus- 
trial Re\'olution,  there  was  still  sufficient  sur\"i\',d  of 
its  s})irit  to  incline  men  towards  a  \"iew  of  wages 
which  is  true,  iii  its  full  extent,  only  of  slave  labor. 
Down  to  the  beginning  of  the  i)resent  century  there 
were  legal  restrictions  on  the  movement  of  laborers 
from  one  parish  to  another;  and  colliers  in  Scotland 
were  even  then  transferri^xl  with  the  pits  in  which 
they  Ial)tii-ed.  The  geiu.-ral  cnndit ions  of  dependence 
were   such   that   the   economic   effects   did  not  ditfer 


2  TJic  Bargain  Theory  of  Wages. 

very  much  from  the  actual  effects  of  legal  slavery. 
The  effect  of  the  Industrial  Revolution  was  gradually 
to  change  all  this.  The  number  of  hired  laborers 
increased  every  \-ear;  and  the  pressure  of  competi- 
tion qualified  the  supremacy  of  the  employer.  His 
domination  of  the  industrial  world  became  merely  a 
predominance.  The  power  of  the  employer  was  still 
indeed  very  great,  and  he  was  able  to  dictate  al- 
most any  terms  he  pleased  to  those  who  depended 
on  him  for  employment ;  but  the  development  of 
Trade  Unionism  and  the  growth  of  the  political 
power  of  the  working  classes  brought  a  greater 
change.  The  legal  restrictions  on  the  movements 
of  the  laborer  had  disappeared,  and  the  progress 
towards  democracy  gave  the  laborer  strength  to 
treat  with  his  employer  as  with  an  equal  and  not 
with  a  superior.  The  centre  of  political  gra\'ity  had 
shifted,  and,  despite  belated  attemi)ts  at  feudal  and 
despotic  government,  the  balance  of  economic  power 
was  with  the  employees  rather  than  with  the  em- 
ployers; and  labor  became  the  predominant  partner. 
The  working  classes  had  been  the  first  to  learn  the 
secret  of  open  combination,  and  from  them  the  em- 
ployers ha\"e  learned,  or  are  learning  it.  The  tacit 
combinations  of  emplo\-crs  to  keep  do\\'n  wages,  to 
which  Adam  Smith  referred,  had  broken  down 
before  the  stress  of  competition  of  master  with 
master;  and  when  competition  was  discovered  to  be 
suicidal,  the  empli)\-ers  opcnh'  associated  aiid  com- 
bined, to  meet  the  combinations  of  the  working 
classes  and  to  make  their  own  power  effective.      They 


W^ajfcs  Theories  Corrcspo)id  to  Labor  Conditions.      3 

([uickly  recovered  from  tlie  unnecessary  panic  into 
which  the  development  of  Trade  Unionism  had 
thrown  them,  and  quickly  recovered  much  of  their 
lost  [(round.  The  condition  of  industry  to-day  is 
one  of  opposini^-  combinations  of  masters  and  men; 
and  an  armed  peace  as  the  result  of  negotiations. 

The  development  of  the  theories  of  \va<^es  corre- 
sponds, in  a  Certain  measure,  with  the  e\'olution  of 
industrial  freetloni.  The  theories,  it  is  true,  follow 
the  de\'elo})ment  of  the  social  phenomena  afar  off; 
and  we  must  not  strain  the  parallelism.  The  earliest 
theor\'  is  the  doctrine  that  waives  are  determined  by 
the  cost  of  the  subsistence  of  the  laborers;  and  it  is 
ob\iously  basetl  on  a  real  or  assumed  analo_<^y  be- 
tween waL^e  labor  and  sla\'e  labor.  It  assumes  the 
absolute  supremac}'  of  the  em])loyer,  thou<4'h  his 
su[)remac}'  is  created  b)-  the  self-imposed  degradation 
of  the  emph^yees  under  the  t\Tanny  of  the  sexual 
instinct.  The  change  in  the  position  of  the  em- 
plo}-LT  from  doniination  to  mere  predominance  is 
followtHl  b\-  the  dewlopment  of  the  W'ages-h'und 
Theory,  in  which  the  measure  of  the  wages  is  the 
in'iention  of  the  capitalist  emplo\'er.  .A  certiiin 
measure  of  fi'eedom  is.  in  thi<  theory,  accorded  to 
the  laborer.  lie  can,  at  lea^-t,  raise  his  wages  b}' 
exercising  self-restraint  and  restricting  hi>  n.umbers; 
but  the  employer  is  still  ihe  dominant  factor  in  the 
A\-ages  ])!-ob]cm.  The  W'age-^-b'und  Tlieorx"  ga\-e 
place  to  the  Product  i\it_\-  Tlie(  ir\-,  in  which  the  ck-ter- 
mination  of  v,age->  is  a])pai"ent  1\"  ri^-gaicled  as  almo>t 
entirely  within  the  laboi'er's  own  ])ower.     Wages  are 


4  TJic  Bargain  Theory  of  Wages. 

paid  according  to  the  efficiency  of  the  laborer,-  and 
the  employer  has  almost  nothing  to  do  with  the 
wages  question  but  to  pay  the  wages.  The  earlier 
positions  are  reversed.  The  laborer  becomes  the 
residual  owner  of  the  product — for  production  has 
become,  explicitly,  the  co-operation  of  capital  with 
labor.  This  theory,  however,  the  acceptance  of 
which  dates  from  the  year  of  Mill's  recantation 
of  the  Wages-Fund  Theory,  under  the  influence  of 
his  growing  interest  in  the  growing  power  of  Trade 
Unionism,  greatly  exaggerates  the  independence  of 
the  laborer's  position.  It  takes  no  account  of  the 
combinations  of  employers,  tacit  or  avowed ;  and 
the  influence  of  such  combinations  in  the  determina- 
tion of  wages  cannot  be  ignored.  The  theory  of 
wages,  consecjucntly,  is  tending  to  change  to  a  form 
in  v/hich  the  supremacy  of  no  one  party  in  the  wages 
transaction  is  assumed.  Neither  the  emplo\-cr,  as 
in  the  earlier  theories,  nor  the  emlpo\-ec,  as  in  the 
latest,  can  be  regarded  as  the  sole  determiner  of 
wages.  The  emplo\-er  is  not  a  donor,  nor  is  the 
emplo\-ee  the  owiier  and  dictator  of  wages.  I'Lm- 
ployer  and  employed  are  opposed  to  each  other 
as  barg.iiners  in  a  market  where,  througli  warious 
causes,  their  forces  are  about  efiual.  Wages  are  to 
be  regarded  as  determined  in  the  \\'a\-  in  which  all 
bargains  are  concluded — partly,  by  the  estimate 
whicli  each  ])art\-  to  the  bargain  has  formed  of  the 
\'alue  of  the  subject  of  the  bargain,  and.  parth',  by 
the  com])arative  sti-ength  and  knowledge  of  the 
bargainers   in    bar''";iinincr.      All    the    earlier   theories 


The  Plan  of  tlic  Essay. 


5 


attempt  to  establish  one  deterniinini,^  principle  of 
washes  accordini;"  as  they  recoi^nize  the  supremacy 
of  the  emplcn'er  or  the  supremacy  of  the  laborer. 
This  theor\',  based  on  the  phenomena  of  ori^aniza- 
tion  of  employers  and  emplo\-ed  in  combinations 
of  approximatel}'  e([ual  stren^jth,  puts  forward  two 
determininL;"  principles,  or,  more  accurately,  asserts 
that  the  waives  of  labor  will  be  determined  between 
two  estimates  as  limits. 

The  object  of  this  chapter,  and  of  the  two  suc- 
ceedinL,^  is  to  establish,  b\'  means  of  a  critical  ex- 
amination of  the  earlier  theories,  the  theory  of  wa_L^es 
as  a  bargain  ;  and  the  result  will,  it  is  hoped,  demon- 
strate, in  the  fourth  chapter,  that  this  eclectic  theory 
embodies  all  that  is  of  permanent  \"alue  in  the  earlier 
theories.  The  doctrines  of  the  j)revailing  philosophy 
have  coiu'inced  all  men  that  no  t^^-eat  mo\'ement  can 
be  entirely  wron;^';  and  assuredly  no  L^reat  theory 
can  be  utterly  rejected.  We  shall  find  that  the  sub- 
sistence theory  ])r()vides  (_)ne  determinin<4'  principle 
and  the  productixity  theorx'  another;  but,  instead 
of  choosin;,;'  one  or  the  other,  and  claimin;:;'  half 
the  truth  as  tlie  whole  truth,  we  sliall  find  that 
the  subsisti'iice  theory  i;i\"es  us  the  seller's  estimate 
of  what  he  h.is  to  sell,  and  tlie  pro(.lucti\"ity  theor\' 
the  bu_\-cr's  estimate  of  what  he  enters  the  market  to 
buy;  and  that  the  \\'a;4es-l'\ind  Theor\-,  in  one  of 
its  propositions,  states  the  force  \vhich  Lletermines 
where,  between  those  limits,  actual  waL;es  are  de- 
termineil,  and,  moreox'er,  gives  the  outlines  of  the 
Complete  theory. 


TJie  Bargain  Theory  of  Wages. 


The  first  important  and  scientific  theory  of  wages 
is  that  tlie  reward  of  labor  is  determined  by  the 
cost  of  subsistence  of  tlie  laborers.  This  theory  has 
been  called  by  various  names — the  Theory  of  Nat- 
ural Wages,  the  Ricardian  Theory,  the  Iron  Law  of 
Wages,  the  Standard-of-Comfort  Theory,  and  the 
Doctrine  of  a  Living  Wage;  but  no  one  of  these 
labels  is  quite  satisfactory.  Li  adopting  the  title  of 
the  Subsistence  Theory,  we  adopt  a  title  which  is 
cxplanator}'  of  the  common  element  in  all  the  phases 
of  the  theory,  and  yet  docs  not  gratuitously  invite 
criticism,  as  the  L-on  Law  of  Wages  does,  for  in- 
stance. 

The  Subsistence  Theory  has  gone  through  some- 
what remarkable  variations;  but  the  change  has 
been  rather  in  the  sentiments  of  the  advocates  than 
in  the  substance  of  the  theory.  The  earliest  writers 
and,  on  the  whole,  Ricardo  himself,  to  say  nothing 
of  the  socialists  who  claim  to  be  Ricardo's  true  seed, 
have  interpreted  the  law  \'ery  pessimistically.  The 
socialists  ha\'e  denounced  the  iron  law  as  the  crying 
e\-il  and  iniquity  of  our  present  social  system  ;  but 
the  modern  ad\'ocates  of  the  theor\-  seem  to  regard 
the  law  as  opening  a  door  of  hope  for  labor.  The 
change  is  not  in  the  substance  of  the  doctrine.  Even 
Ricardo,  at  times,  as  we  might  show,  regarde^l  the 
cost  of  subsistence  as  a  \'ariable  minimum,  not  neces- 
sarily coincident  ^\•ith  the  cost  of  i)]n'sical  life.  Ills 
|)assing  admissions  ha\'e  been  taken  up  and  an"i[)lined 
b\-  the  modern  adiierents  of  the  theor\-  till  the  theory 
itself   seems   transformed.       Vet    ls\x.    Gunton,    the 


TJic  Variations  in  the  Subsistence  Theory. 


most  ardent,  as  he  is  the  most  scientific,  of  the  opti- 
mists, does  not  claim  that  waives  should  vary  \vith 
every,  the  slightest,  variation  of  the  standard.  The 
theory  has  changed  its  sk)-  but  not  its  nature.  The 
difference  between  the  earl\-  and  the  later  forms  of 
the  theory  is  due  to  the  "generally  changed  attitude 
towards  labor  questions.  Ricardo,  writint^  at  a  time 
when  the  first  and  most  lastini;  impression  made 
by  Malthus  was  one  of  the  most  important  facts  in 
the  world  of  economic  theory,  was  pessimistic  and 
rei^arded  wages  as  tending  naturally  to  fall  as  low  as 
possible.  Mr.  Gunton,  and  the  self-ci;)nstituted 
spokesmen  of  the  modern  labor  movement,  writing 
after  half  a  centmy's  progress  of  the  working  classes 
and  steady  rise  of  wages,  regartl  the  standard  of 
subsistence  as  a  method  of  raising  wages.  Ikit  tlie 
essence  of  the  theory  is  in  both  cases  the  same. 
The  value  of  labor  is  determined  from  the  side  of 
labor  alone.  The  si.ile  determiiiant  is  the  cost  of  the 
commodities  on  which  the  l.djorer  subsists;  whether 
this  cost  be  regarded  a^  determined  by  the  rapacity 
of  tlie  capitalist  (as  tlie  socialists  sa}-),  by  the  tyranny 
of  the  sexual  instinct,  or  b\-  the  firmness  with  whicli 
the  Working  classes  maintain  their  customar\-  or  as- 
sumed mode  of  life.  The  force  which  o])erates  to 
make  the  cost  of  subsistence  the  standard  of  wages 
ditfers  according  to  the  stand})oint  of  the  theorist; 
but,  in  all  cases  whate\"er,  the  substance  o[  the 
theor\-  is  tlie  same. 

Adam    Smith,    and    his    successors,    tre-ated     tiie 
theor\-  of  disti-ibutioii  a-^  if  it  were  (')nl\-  a  branch  of 


The  Bargain  Theory  of  Wages. 


the  theory  of  production.  In  wages  as  wages  they 
had  httle  interest.  The  chapter  in  the  Wealth  of 
Nations  deahng  with  wages  is  the  first  of  four  chap- 
ters discussing  the  component  parts  of  price.  Wages 
were  thus  regarded  mainly  as  an  element  in  the  cost 
of  production  ;  and  it  was  natural  that,  when  the 
reward  of  labor  was,  for  the  moment,  considered  in 
itself,  the  general  point  of  \'iew  should  be  retained 
and  the  discussion  of  wages  become  a  discussion  of 
the  component  parts  of  the  cost  of  production  of 
labor.  His  treatment  of  wages  is  fruitful  of  sugges- 
tions; and  germs  and  illustrations  of  all  the  later 
theories  may  be  found  within  the  narrow  limits  of 
that  one  chapter;  but  the  natural  development  was 
in  the  direction  of  a  theory  of  wages  which  finds  the 
explanation  in  the  cost  of  production  of  labor. 

No  one  has  ventured  to  advance  a  naturalistic  in- 
terpretation of  the  cost  of  production  of  labor.  The 
phrase  has  alwa}-s  been  interpreted  in  terms  of  the 
cost  of  the  commodities  necessary  for  maintaining 
life.  The  cost  of  production  of  a  machine — and 
labor,  from  this  point  of  view,  is  only  a  more  costly 
because  a  more  com^^lex  machine — is,  firsth',  the 
cost  of  the  fuel  and  the  other  requisites  of  its  opera- 
tion, and,  secondly,  the  reserve  set  aside  against  de- 
preciation for  renewing  or  replacing  tlie  machine 
when  it  is  worn  out.  These  two  items  in  tlie  case 
of  labor  are  the  cost  of  maintaining  the  laborer  in 
working  con^lition,  and  the  cost  of  rearing  new  sup- 
plies of  labor  tf)  take  the  ])lace  of  the  old  when,  in 
the  course  of  nature,  that  is  worn  out  or  superan- 


ll\g-rs  as  a)i  Element  of  Cost. 


nuatcd.  ]5ut  the  analogy  from  niacliiiicry  seems  to 
lead  us  too  far.  The  reserve  set  aside  for  rei)kicin<^r 
and  renewuii:^  a  machine  remains  in  the  i:)Ossessi()n  of 
the  owner;  but  the  new  suppHes  of  Labor,  for  the 
provision  of  which  aHowance,  accortHni^  to  the 
theory,  must  be  made,  are  not  the  property  of  the 
emph)yer  except  undi'r  tlie  conditions  of  shivery. 
The  criticism,  tlierefore.  raised  ai^ainst  the  theory 
on  this  point  is  not  without  justificatioii.  The 
anah)_c;\-  is  pressed  too  far  to  the  nei;lect  of  the  ob\'i- 
ous  fact  (^f  the  thfference  between  persons  and  things. 
The  difference  is  essenti;iL  There  is  no  necessity 
that  an  emph)yer  shcnild  have  such  a  tender  rec^ard 
for  the  interests  of  emph^yers  of  the  next  jgeneration 
as  to  make  him  pa\-  hii;her  \\-a_<^^es  to  maintain  the 
supply  of  labor  and  replace  the  labor  ^\■hich  is  worn 
out.  Most  emj^iloyers  arc  content  that  there  slu>uld 
be  profit  in  their  time,  and  (piite  willin;^-  to  be  as 
Irish  as  Sir  Boyle  Roche  in  their  disrei^ard  of  pos- 
terity. If  the  early  economists  had  intei'preted  the 
law  in  the  same  way  as  the  sochdists,  who  ha\'e 
forcibly  entered  into  their  lcd)ors,  the  objection  that 
the  theor_\-  was  inconsistent  would  be  perfectly 
sound.  The  cost  of  rearini^  and  educatinL^  a  family 
cannot  sti'ictl\-  be  included  within  a  minimum  of 
subsistence.  If  this  item  is  included  in  the  cost  of 
production  of  laboi',  we  cannot  ri;_;litl\'  sp^ak  of  a 
minimum  of  sub^istiMice.  Iv.it  for  the  eai'h'  econo- 
mists it  was  not  the  rapacity  of  the  emp!o\-cr  l)ut 
the  strength  of  the  principle  of  population  which 
made  the  cost  of   sub-^i-tence  the  measure  of  waives; 


10  TJic  Bargain  Theory  of  Wages. 


and  the  principle  of  population,  not  unnaturally, 
admits  the  inclusion,  within  the  minimum,  of  an 
amount  sufficient  to  prex'cnt  the  race  of  laborers 
from  bccominij  extinct. 

There  can  be  no  manner  of  doubt  that,  in  the  long 
run,  wages  are  sufficient  to  cover  both  the  cost  of 
maintaining  the  laborer  and  the  cost  of  rearing  the 
new  supplies.  If  industry  is  to  continue,  and  in- 
dustry does  continue,  both  items  of  the  cost  must 
be  met,  and  both  items,  therefore,  are  met.  Wages 
are  sufficient  to  co\"er  the  cost  of  production,  but 
arc  the\'  more  than  sufficient  ?  Is  there  a  surplus 
accruing  to  labor  as  a  ^\•hole,  over  and  abo\'c  the 
amount  necessary  to  cover  the  cost  ?  The  question 
is  often  rendered  more  difficult  of  answer  because  of 
a  failure  to  make  an  ob\"ious  distinction.  We  are  in 
the  habit  of  estimating  wages  simply  in  gross, 
whereas  rent  and  interest  are  net  returns.  The 
absolute  necessity  that  the  capital  expended  in  pro- 
duction should  be  replaced  is  at  all  times  asserted  ; 
and,  ON'er  and  aboN'e  the  capital  sum  replaced,  it  has 
gencralh'  been  recognized  that  a  pa}'ment  should  be 
made  for  the  use  of  the  capital,  or  (as  \ve  may  say 
without  prejudice)  as  the  reward  of  abstinence.  The 
retiu'ns  of  cajiital,  however,  are  not  estiniatcd  as  a 
gross,  but  purch'  as  a  net  return.  Interest  is  the 
return  to  capital,  and  that  is  not  said  to  be  103  or 
I  10,  but  three  or  ten  per  cent.  0\'er  and  aboN'e  the 
capital  sum  a  further  ])a\'ment  is  made.  Rent  is 
also  a  ])urel\-  net  return.  The  natural  properties 
of  tin:  soil   remain   practically  intact;  and  the  land- 


I Vf lifts  a  Gross  Return.  1 1 


owner's  share  is  rei^artled,  not  as  his  land  returned 
to  his  keepin_<4'  in  its  oriL^inal  condition  pUis  tlie  rent 
lie  recei\'es  for  its  use,  but  simply  as  the  rent  which 
he  obtains.  Iii  the  case  of  \vaL;-es,  the  treatment  is 
ditterent.  \\\ii;es  are  treated  as  if  the}'  were  a  net 
return  C(~)mparable  in  some  wa\'  with  the  three  or 
the  ten  per  cent,  of  interest.  Xo  distinction  is 
made,  as  in  the  case  of  capital,  between  the  refund- 
ing^ of  the  enert;")-  expentled  and  the  payment  for  the 
use  of  that  ener<;\'.  l^oth  are  lumped  toi;'et]ier,  and 
the  only  attem[)t  made  to  distinL,aiish  them  is  in  the 
theor\-  and  j^tractice  of  taxation  when  a  minimum  is 
exempted.  \\;t  the  laborer,  as  we  may  sa\-,  b\-  con- 
venient analoi;y,  has  inx'ested  his  ca[)ital  fund  in  pro- 
tluction  just  as  reall\-  as  the  capitalist  ha.-^  liis  ;  and 
there  is  the  same  necessity  that  this  expenditure 
should  be  refunded,  if  production  is  to  be  economi- 
cal, ddiis  expenditure  is  the  enei'_L;\'  s[)ent  in  labor 
and  includes  more  than  mere  ])h\-sical  exeilion. 
Tlie  energy  expended  xarirs  in  kind  as  well  as  in 
de_L;"i'ee;  and  tlie  eiu.-rL^y  rcd'unded  mu>t  be  an  exact 
Cfpn'wdent  of  what  is  e'xpeiidetl.  The  encr;_^y  ex- 
pended bv"  an  artisan  in  ;i  higher  skille.!  trade  re- 
(piiianL;  a  lai';^"e  amount  of  attention,  oi'  the  nerx'ous 
ener^-y  expended  1)\-  a  couimi^n  school  teacliL'i'.  are 
(_liffi.'i\  nt  in  kind  as  a\  ell  ;is  in  de;,n'ee  from  tliat  ex- 
pended by  a  Common  d.i\-  l.i])orer;  and  tlie  amount 
refuniU'd  must  \ar\-  accordiiv^lw  The  return  to 
laboi"  must,  at  lea-t,  be  such  as  will  enable  each 
workei'  to  stai't  hi-^  wiirl-:  on  the  mori'ow  in  the  same 
condition  as  he   started  the  pi'e\a"ous  da\"  or  the  pre- 


12  The  Bargain  Theory  of  Wages. 


vious  week.  The  standard  of  his  efficiency  must  be 
maintained.  It  is  true  that,  just  as  ca])ital  may  be 
so  invested  that  it  not  only  does  not  receive  a  net 
return  in  the  shape  of  interest  but  may  itself  not  be 
refunded,  labor  may  be  so  employed,  by  itself  or  in 
the  service  of  another,  that  the  reward  of  labor  is 
not  sufficient  to  replace  the  energy  expended.  In 
this  case  the  result  is  the  degradation  of  labor.  On 
the  whole,  and  in  the  long  run,  the  wages  of  labor 
are  sufficient  to  refund  the  energy  expended,  but  are 
they  ever  more  than  sufficient  ?  Does  labor,  like 
ca])ital,  obtain  a  surplus,  or  a  net  return  ?  LaVjor 
has  the  same  right  as  capital  has  (if  we  may  speak 
of  right  in  either  case)  to  demand  a  surplus  return, 
over  and  abo\-e  the  refunding  of  the  energy  ex- 
pended; and,  if  labor  does  not  receive  a  net  return, 
corresponding  to  interest,  it  must  be  because  there 
is  something  special  in  the  conditions  of  labor  which 
pre\'ents  this  result. 

The  advocates  of  the  subsistence  theory  have 
generally  contended  that  labor  must  and  does  obtain 
a  return  sufficient  to  refund  the  energy  expended; 
but  they  have  not  al\\'a}'s  gone  on  to  ask  ^\'hether 
labor  receives  anj'thing  o\"er  and  above.'"  Interest, 
according  to  the  popular  view,  is  necessary  because, 
without  it,  capital  would  not  be  saved  and  invested 
in  sufficient  cpiantit}-  to  maintain  industrial  efficiency. 
Is  labor  entitled  to  demand  a  similar  net  return,  or 

*  A>iam  Sniiili's  siii;L;e-tivc  analysis  nf  ilie  .-tanilard  of  subsistence 
(sec  iiMtc,  p.  23)  was  not  taken  up  until  the  theory  was  being  tried,  to 
be  found  wanting. 


Is  There  a  Net  Return  to  Labor  ?  1 3 

arc  tlierc  forces  at  work  which  enable  tlie  employers 
directly,  and  society  indirectly,  to  di»;re<^Mrd  this  de- 
mand of  labor  ?  Now  labor  in\'ol\-es  disutility  as 
fully  and  as  certainly  as  savini^^  in\'olves  abstinence 
and  self-denial.  The  laborer  has,  it  is  true,  less  to 
gain  and  more  to  lose  by  refusini(  to  work,  than  the 
capitalist  has  in  not  abstainini^  from  consuming  his 
wealth.  The  laborer  is  dependent  for  Ids  life  on  his 
working;  but  the  ca})italist  need  only  not  practise 
self-denial.  However,  since  labor  involves  disutility, 
simply  to  replace  the  encrg}-  the  laborer  has  ex- 
pended will  not  alwa\'s  be  sufficient.  The  laborer  is 
not  a  machine,  but  a  human  being  actuated  by  indi- 
vidual and  personal  moti\'es  and  feelings;  and  he  is 
little  likely  t(^  spend  himself  simply  that  his  expenses 
may  be  refunded.  Indi\-iduals  may  be  so  inclined; 
but  the  great  mass  of  men  value  theniseh-es  uK^-e 
highly.  If  there  is  not  a  net  return  in  cases  wliere 
the  disulilit}'  of  labor,  from  whate\-er  cause,  is  great, 
the  laborer  will  content  himself  with  the  expenditure 
of  but  little  of  his  energ\-.  In  order  to  obtain  the 
best  results,  it  will  always  be  found  necessary  that 
something  more  than  the  maintenance  of  tlie  status 
quo  a)ite  should  be  assured.  There  are  tho<e  who 
must  sa\-e  and  those  who  cannot  helj)  sa\'ing,  and 
for  thei.n  the  net  returri  to  capital  need  not  be 
high;  but  a  certain  rate  of  interest  has  been 
found  to  be  neces-^ary  to  call  out  tliat  amount  of 
abstinence  frc^m  the  immediate  utilities  in  coiisump- 
tion  as  will  enable  industiA'  to  be  carried  on  ar.d  ex- 
tended,     ."^i)    although    all    laborers    (or    nearh'    all) 


14  The  Bargain  Theory  of  Wages. 


must  labor  to  continue  living,  a  net  return  to  labor 
is  necessary  to. get  the  best  industrial  results  from 
the  laborer. 

The  early  advocates,  at  least,  of  the  subsistence 
theory  declare,  in  effect,  that  a  net  return  to  labor 
is  unnecessary  and,  in  the  long  run,  improbable. 
The  glory  of  going  on  and  still  to  be,  is,  in  their 
view,  a  suf^cient  incentive  to  overcome  the  disutility 
of  labor.  The  necessit}'  of  li\'ing  provides  a  strong 
enough  incentive.  The  laborer  must  live  and  to 
live  must  be  prepared  to  sacrifice  his  comfort.  He 
has  no  reserve  on  which  to  subsist ;  and  the  stern 
necessities  of  daily  life  compel  him  to  work  for  that 
which  is  just  sufficient  to  enable  him  to  subsist. 
Should  he.  by  the  benevolence  of  his  employer,  or 
through  the  force  of  public  opinion,  or  from  acci- 
dent, obtain  a  higher  reward  than  is  necessary  to 
enpiblc  him  to  subsist,  he  will  either  labor  less,  or  he 
A\-ill  indulge  himself  in  such  a  way  as  eventually  to 
bringdown  his  enhanced  wages  to  an  amount  \\'hich 
sim])I\-  enables  him  to  ccjntinue.  AnvMig  semi- 
cix'ilized  and  indolent  races,  work  will  cease  \\'hcn 
enough  has  been  earned  to  prox'ide  subsistence; 
among  ci\'ih'zed  peo])le,  the  effect  of  a  surplus  over 
the  cost  of  sub>istence  will  be  to  increase  competi- 
tion till  \vages  fall  to  the  subsistence  limit.  The 
wages  of  going  on  may  Ije  \'ery  much  higher  in  one- 
countr\-  than  in  anotlier.  The  intensit\-  of  labor 
differs  in  different  countries;  and  cr)nsequenrlv  a 
greater  or  le:-s  aniount  is  required  to  replace  tht; 
energ\'   expended.      Wages   must,    in   the   long   run, 


Labor  of  J  ^rryia^ij^  Intensity. 


15 


be  sufficient  to  C()\'er  the  ex[)encliture,  but,  in  the 
lont^  run,  the\'  need  not  be  more  than  sufficient;  for 
the  necessity  (-)f  making  a  H\'ing  is  a  force  strong 
enough  to  counterbahmce  the  clisutiHt}'  of  lalj(M'. 

The  gradual  change  in  the  subsistence  theor\-  of 
wages  was  due,  in  part,  to  the  fuller  recognition  of 
the  fact  that  labor  is  of  varying  degrees  of  intensity 
and  hence  in\'ol\-es  a  greater  or  less  expenditure  of 
energ)'.  Ricardo  and  the  early  exponents  seemed 
to  regard  all  labor  as  being  of  one  cpialit}'  and  hence 
as  involving  the  expenditure  of  equal  amounts  of 
energy.  W^ages,  therefore,  were  taken  to  be  the 
ec^uivalent  which  was  necessary  to  replace  this 
energy.  The  actual  variations  of  wages  were  ex- 
plained by  means  of  the  distinction  between  market 
wages  and  natural  wages.  Except  in  a  theoretical 
case,  wages  were  determined  by  the  amount  of  com- 
modities necessary  to  sustain  the  life  of  the  laborer; 
and  this  amount  was  not  considered  as  \-ar\'ing  from 
iiuli\-idual  to  indi\-itiual,  but  as  determined  abso- 
lutely !_)}•  constant  plu'sioh^gical  C(^iuliti(^ns.  The 
theory,  at  this  stage,  takes  practicall\-  no  account  of 
the  fact  that  the  expeiulilure  of  energ}'  is  not  always 
an  expenditure  of  bodil)-  force.  \Tt  there  is  no 
common  term  which  will  enable  us  to  com})arc  the 
energ}-  se\-eralh-  expended  say  b}-  a  schnol  teacher,  a 
newspaj)er  composite  )r,  ani.1  a  (lock  lal)orer.  I'".,ieh 
ma\'  l)e  c<irrespondingl\'  ecpiipped  fur.  and  eftleieiit 
in,  his  work;  and  at  the  end  of  a  da\"'s  laboi'  eacli 
ma\- be  correspondingh'  w<irn  out.  To  enable  them 
to  bcLfin  the   m<)rrow's  work  with,   their   f<.)rmer  efti- 


1 6  The  Bargain  Theory  of  Wages. 


ciency,  each  requires  a  different  kind  of  treatment 
and  recuperation.  The  minimum  of  subsistence 
which  will  effect  this  result  is  so  different  in  each 
case  that  to  use  the  term  physical  minimum,  as 
applying  indifferently  to  all  three,  is  to  darken 
counsel  by  words  without  knowledge.  The  laborer 
will  probably  require  more  food  than  the  other  two. 
The  workingman  is  a  better  customer  to  the  grocer 
than  a  professional  or  semi-professional  man  with 
twice  the  salary  of  the  workingman.  Yet  the  fact 
that  a  teacher  eats  less,  but  is  more  fastidious  about 
what  he  eats,  affords  us  no  warrant  for  declaring 
that  the  greater  part  of  his  expenditure  could  be 
dispensed  with  because  his  pln-sical  minimum,  esti- 
mated in  pounds  avoirdupois,  is  less  than  th.e  pln-si- 
cal minimum  of  a  dock  laborer.  So,  e\'en  if  we  take 
the  standard  of  subsistence  as  a  pln-sical  mininnim 
including  no  surplus,  we  must  yet  admit  that  the 
ph\-sical  mininnim  will  var}-  according  to  the  nature 
of  the  occupation.  The  only  real  measure  there  can 
be  of  a  mininnim  of  subsistence  is  the  amount  of  the 
necessaries,  comforts,  and  luxuries  of  life  which  is 
necessary  to  enable  each  worker  to  iDcgin  each  da}-'s 
labor  with  his  energy  restored.  The  ph}-sical  mini- 
mum in  other  ^vords  must  be  relatix'c  to  the  industry 
in  which  the  laborer  is  engaged  and  be  sufficient  to 
maintain  the  exi^tin.g  standard  of  efficienc}-.  But  a 
ph}-sical  minimum,  interpreted  in  this  wa}-,  is  far  too 
variable  to  afford  a  foundation  for  a  law  of  wages ; 
and  it  was  natiu'al.  e-^pecially  in  \iew  of  the  })romi- 
nence    of    Malthus's    doctrine,    that    the    minimum 


Priiu'iplc  of  Population  i>i  Waives  Theory.         ly 


should  be  inter[)rctL'd  physioloi^ically  raUicr  than 
industrially.  A  plu-siolo^ical  niininunn  docs,  and 
an  industri.d  niininium  docs  not,  j)r()vidc  that  cle- 
ment of  certaint}-  and  stability  which  is  necessary  in 
the  determinant  of  waives. 

Ricardo's  loi;ical  mind  discerned  that  it  was  im- 
possible to  base  a  scientitic  law  of  waives  u})()n  a 
varyinL^  foimdation.  There  must  be  some  power 
behind  the  law  to  detei'mine  waives  in  accordance 
with  it.  Without  this  power,  the  law  can  have  but 
little  scientific  importance.  The  pcjwer  wh.ich  brings 
the  law  into  operation  Ricardo  and  his  contempo- 
raries and  successors  found  in  the  i)rinciple  of  popu- 
lation. ^Ir.  Conner  is  somewhat  indignant  that 
Ricardo  should  habitually  be  misrepresented  as 
putting  forward  a  fixed  and  in\-ariable  standard; 
and  passages  might  be  cj noted,  such  as  Chapter  V., 
p.  74,  of  the  Priiioiph-s  (Conner's  edition),  in  which 
Ricardo  somewhat  despontlingh'  remai'l-cs  that  the 
natin'al  pi'ice  of  l.d^or  is  "  not  cd)S()lutel_\-  fixed  and 
cimstant."  Init  Ivicardo  was  too  logical,  and  also 
too  much  under  the  domiiialion  of  the  Malthusian 
idea,  to  hi\-  much  stress  on  the  exceptions  he  allows. 
It  \\.is  ne'cessar}'  for  scientific  exactness  that  tlic 
standard  should  be  fixed,  and  the  principle  of  ])opu- 
lation  at  once  sugge>ted  it-.clf  as  the  power  which 
niade  the  law  opei',iti\'e.  TJie  pi'es-ure  of  popula- 
tion against  the  limits  of  sub-^istence  i>  due  to  the 
strongest  force  in  human  natui'e,  ami.  although 
Malthus,  in  the  latei' edi;  ioii<,  ceases  to  be  a  Malthu- 
sian,  the  popular  impre'->ion  ot  his  doctrine  remained 


TJic  Bargain  TJicory  of  Wages. 


firm  that  no  institution  or  custom  was  strong  enough 
to  stand  long  as  a  bulwark  opposed  to  the  principle 
of  population.  The  dread  of  over-population  (which, 
in  the  strictest  Malthusian  sense,  however,  is  an  im- 
possibility) made  every  economist  tremble  for  the 
safety  of  any  institution  which  did  so  oppose  itself. 
Consequently,  to  Ricardo  and  his  successors,  the 
possibility  of  any  standard  of  comfort  higher  than 
the  physiological  minimum  was  onl)'  theoretical. 
Yet,  as  the  industrial  conditions  became  more 
favorable  to  labor,  wealth  increasing  faster  than 
population,  economists  came  to  haxx-  that  better 
understanding  of  the  doctrine  of  population  to 
AN'hich  Malthus  himself  had  come,  and  the  idea  of  a 
standard  of  comfort,  a  conception  more  closel\-  in 
accordance  \\\\.\\  the  facts,  replaced  the  physiological 
minimum  as  the  determinant  of  wages.  Unfortu- 
nately, the  farther  we  depart  from  the  pliysiological 
minimum  and  the  miM'c  elastic  the  standard  is  al- 
lowed to  become,  the  less  satisfactory  does  the 
standard  of  subsistence  become  as  the  basis  of  a 
scientific  theory.  Ricardo  had,  on  the  whole,  an 
inw'iriable  standard,  because  wages  cannot  fall  belf)\v 
a  ph\-sioIogical  minimum  and  remain  below  if  in- 
dustr\-  is  to  continue.  The  elastic  standard  of 
comfort  cannot  be  used  with  the  same  effect,  unless 
we  can  demonstrate  that  the  standard  of  comfort  is 
so  supported  b\'  custom  and  so  entrenclied  l^eliind 
all  the  moral  abhorrence  ^\"hich  men  can  muster 
again-^t  a  lower  owXnx  of  li\'ing,  that  it  is  practically 
impossible  to  force  men  to  accept  an)'  other. 


Industry  Subject  to  Fluctuations.  19 


The  fact  tliat  on  less  than  represents  a  standard 
of  coinf(5rt  a  man  nia\',  for  a  time,  support  Hfe,  is  the 
source  of  danger.  If  industry  were  always  pro- 
gressive, or  even  permanently  in  a  stationary  state, 
a  standard  of  comfort  mii;]it  possess  stabilit\- ;  but 
modern  industry  is  subject  to  periodical  tluctua- 
tions;  and,  during"  depressions,  lari^e  nundjers,  and 
a  comparatively  lari^'c  proportion  of  the  workinc^ 
classes,  are  out  of  employment  and  may  therefore 
be  faced  with  the  alternative  of  starvation  or  the 
acceptance  of  a  wage  lower  than  will  permit  the 
maintenance  of  the  standard  of  comfort.  Is  not 
the  life  more  than  meat,  and  the  bculy  than  raiment  ? 
they  may  urge,  unanswerabl)',  to  their  protesting 
habits  and  prejudices.  It  is  hard  to  understand  how 
an}-  pre'i'udice  in  fa\'or  of  a  particular  manner  of 
li\-ing  can  withstand  such  an  ap[)eal.  and.  under 
modern  industriid  conditions,  such  an  appeal  has 
often  to  be  matle.  It  is  waste  of  words  to  speak  of 
a  st<d:)le  st.mdartl  of  cc^mfort  when  ten  percent.,  and 
more,  of  the  working  classes  ma\'  be  out  of  work; 
atul  }-et,  without  stabilit_v,  the  existence  of  a  standard 
of  comfort  has  little  bearing  on  the  prolilem  of 
the  determination  of  wages.  It  is  to  a  conscious- 
ness ot  the  tendenc}'  of  irregularit}-  of  I'mploy- 
rnent  to  lower  the  standard  of  lix'ing  tliat  the 
modern  demand  fia'  fixing  tlu:  lixing  wai^a-  is  due. 
Thi.'  standard  of  a  li\iiig  wage  is  not  fixed  far  in 
adwuueof  w'jiat  the  members  of  tlu;  working  classes 
can  concei\-e.  It  is,  on  the  contrar\-,  determined  as 
the   ordinary  stand. u'd  of   comfort  at  which,  in  pros- 


20  TJlc  Bargain  Theory  of  ]\^agcs. 


pcrous  times,  the  \vorkin<^  classes  live.  "It  has  been 
objected,  and  objected  rightly,  that  to  establish  such 
a  standard  wage  must  have  the  effect  of  reducing 
emplo}-ment  and  throwing  the  less  efficient  out  of 
work;  but  it  is  answered  that,  for  the  best  interests 
of  the  working  classes  as  a  whole,  total  lack  of  em- 
plo}-ment  for  some  is  better  than  irregularity  of  em- 
ployment and  wage  for  all.  While  all  are  subject 
to  the  irregularity  due  to  the  fluctuations  in  trade, 
the  class  standard  can  neither  be  high  nor  stable. 
The  object  of  a  policy  of  a  living  wage  is  to  avoid 
the  degradation  of  the  whole  class  by  throwing  the 
burden  on  the  less  fortunate  indi\'iduals,  justifying 
the  policy  in  the  old  way  that  it  is  expedient  that 
one  man  should  die  for  the  people  and  that  the 
whole  nation  ])erish  not.  The  same  notion  is  behind 
the  plans,  such  as  Mr.  Charles  Booth's,  for  the  organ- 
ization of  dock  labor.  The  rationale  of  these  propo- 
sals is  that  the  standard  of  the  workirig  classes  is  so 
far  from  being  permanent  enough  to  determine 
wages,  that  we  must  practically  determine  wages  to 
pre\'ent  the  standard  from  being  set  aside.  Before 
the  standard  of  comfort  can  act  as  the  determinant  of 
wages  it  must  possess  stability.  Without  stability, 
it  is  without  the  power  t<^  go\-crn  wages.  Ricardo 
and  the  early  economists  \\'ere  aware  of  the  scientific 
necessity  of  ha\-ing  a  fixed  standai'd.  and,  for  this 
reason,  accepted  the  standard  of  a  ph\'siological 
minimn.m.  arguing,  in  s])ite  o{  their  theoretical  ad- 
niissions.  as  if  wages  were  down  to  the  minimum. 
Bclrnv  a  physiological   minimum   wages  cannot  long 


Snbsis/cncc  Theory  a)id  Industrial  Conditions.     2 1 


remain,   and   this  was   their  point   of  absolute  cer- 
tainty. 

During  the  first  half-century  after  the  beginnings 
of  the  factory  s\'steni  the  outstanding  features  of  in- 
dustrial aiul  soci.d  life  were  such  as  permitted  the 
economist,  \\\{.\\  the  assistance  of  his  theoretical  ex- 
ceptions, to  hold  uncpiestioned  this  doctrine  of 
natural  wages.  In  I'^.ngland,  wages  \\'ere  \"ery  low, 
although  they  probably  were  not  cpjite  down  to  the 
ph\-siological  minimum.  i\n\-  di\'ergence  between 
actual  wages  and  the  cost  of  subsistence  in  this  narrow 
sense  was  obscured  by  the  fact  that  wages  and  the 
price  of  grain  generally  lluctuated  together.  The 
doctrine  receix'cd  strong  corroboration  from  the 
prtrath^x  of  poor  relief  and  the  apparent  impossibility 
of  remed\-ing  the  defects  oi  the  poor  laws.  y\11ow- 
ances  were  made  by  the  parish  to  the  poor,  and  the 
conc^lition  of  the  poor  remained  the  same.  The  net 
result  of  the  parish  allowances  w.'is'ti:)  assist  the  em- 
{)loyer  b\-  pa\-ing  for  hin)  part  t'f  the  ^\■;lges  which 
he  would,  under  other  con^lilions,  ha\'e  had  to  pay 
out  of  his  own  pocket.  ^Vs  the  allowance  fron"i  the 
])ari-h  incre;ised.  w  ages  decreased  ;  and  the  i)foblem 
bafllcd  the  best  minds  of  the  communit}'  till  they 
were  forced  to  abolish  the  (dd  SN'stem  of  poor  relief 
ahog(.;ther.  This  pai"adoxical  phenomenon  could  be 
best  explained  b}'  the  sub>i>leiice  theor\'  of  wages, 
and  it  i.--  hard  to  see  what  other  explanation  can  be 
ottered.  In  the  unprotected  CMulition  of  the  work- 
ing classes  in  the  v:w\\-  i\Ay>  nf  the  factory  system 
the  subsi>tence  thei>r\'  nf   wages   imdoubtedl)'  offers 


Tlic  Bargain  TJicory  of  Wages. 


a  full  explanation  of  the  facts,  and,  wherever  the 
same  hoj)eless  condition  exists  as  existed  in  Eng- 
land at  the  beginning  of  this  century,  the  subsistence 
theory  will  afford  the  best  explanation  of  the  deter- 
mination of  wages.  In  such  a  case  it  will  be  found 
to  be  as  true  as  it  was  then,  that  every  charitable 
allowance  made  in  aid  of  wages  will  serve  to  admit 
of  lower  wages  being  paid.  There  is  so  much  glib 
talk  of  the  progress  of  civilization,  and  of  the  ])rogress 
of  the  working  classes,  that  we  are  apt  to  forget  that 
there  is  a  large  section  in  every  community  for 
whom  there  has  been  no  amelioration.  Socially  and 
industrially  the  "  white  sla\'e  "  victim  of  the  sweater 
is  in  the  same  position  as  those  workers  \\\\o  were  in 
receipt  of  poor  la\v  relief  at  the  beginning  of  the 
century.  The  poor  relief  system  has  been  im- 
mensely improx'ed,  and  it  is  no  longer  to  the  em- 
plo}'er  of  labor  that  the  State  grants  aid  from  the 
rates;  but  the  economic  sense  of  the  community  has 
not  yet  been  educated  to  see  that  a  frequent  effect 
of  the  half-crown  dole  to  the  poor  struggling  widow 
is  to  enable  her  to  acce];)t  lower  wages,  and  possibly 
to  drive  down  the  wages  of  others  who  receive  no 
half-crowns.  Against  indiscriminate  charit\-  ever\- 
one  of  us  is  prepared  to  take  up  his  parable,  but 
what  of  discriminating  charity  ?  Discrimination  is 
good,  but  if  the  light  that  is  in  us  be  darkness  I 

In  conserpience  of  the  rise  of  wages  during  the  last 
half-centur}'.  the  theory  cannot  now  be  maintained 
in  its  originrd  somewhat  naT\"e  form.  The  wages  of 
the  majority  (jf  the  working  classes  are  considerably 


Chaiti^id  Industrial  Conditioiis.  23 

above  the  physical  niinimuin  aiul,  in  consequence, 
much  of  the  orii^inal  artainient  and  counter-ari;unient 
lias  lost  its  force,  although  still  often  put  forward. 
X.iturall}'  a  L;"ood  deal  of  e\ick:nce  is  of  an  ex  post 
facto  character.  This  ex'idence  woukl  be  fully  ad- 
missible, if  cari.'  were  llrst  tak'en  to  show  in  \irtue 
of  what  necessil)-  tin;  standard  of  comfort  does  (U;- 
tennine  waL;'es ;  but  this  CcU'e  has  not  alwax's  been 
t.d^en.  W'.i^es  ai"e  hi;^iier,  therefoi'e  the  standai'd 
must  ha\e  been  higher,  is  a  ty})e  of  the  st\de  of 
ar_L;"ument,  and,  in  spite  of  Adam  Smith's  common- 
sense  comment  that  "it  is  not  because  one  man 
kix-ps  a  coach  while  his  neii^hbor  walks  a-foot  that 
the  one  is  rich  and  the  other  poor;  but  because  the 
one  is  rich  he  keeps  a  coach,  and  l)ecaus(,:  the  other 
i-.  j)oor  he  walks  a-foot,"  ■"■   w  propter  hoc  is   asserted 

*  Woilth  ('/"  Xi!l'u>n>,  p.  31.  The  oliJL'ctioiis  tn  the  <lMctriiie 
wi-ie  ^-el  furih  by  Ail;uii  Siiiilh  aliii'i^i  hcforc  ihc  (I'Tlrine  lia'l  hccn 
ilcaiiv  fiiMiiiihitd.  The  dhjectimi-,  a:'e  rai-el  I'l  t!ie  car!_\'  f' inn  df 
the  tiie^rs'  ai'jl  liave  not  llie  same  furee  aL;air.--l  the  stanihu'l  cf  C'Dh- 
f'  irl.  The  a'lxurate-;  ii'  i  h  in,;er  ii;-~i-t  ( iii  the  iieLe>>ary  ci  'iTe^pi  Muleiice 
lietweeii  \\a_;e>  aii'l  price--,  ami  with  mie  exeenti'Hi  Aihiin  Sniitli's 
(Tjeeti'ins  aie  N'arial  ;i  Ml--  nf  the  cnnteiiliMii  tliat  \\aL;e<  ami  piices  vary 
iinlepenileiitly  i  'f  eae!i  n'Jier.  The  exi'enii"  >n  i-;  thai,  in  a^riciilU!:  e  at 
K-i-t,  summer  \\aL;es  ar;  hi^^'hcr  th:in  \\  inter  \\aL;es,  al'.h' ii'.;_;h  the  e^^l 
f)t  livihL;  is  If---,  in  slimmer  than  in  winler.  I'his  diijeeli'm  cannot  lie 
met  I'V  a' 1  milting;  that  \v"aL;es  <hi  r."t  re-;  ■•  ml  to  smhien  changes  in  the 
C'  !-.t  Ki'  li\inL;,  f  'T  the  I  io,a-:"n .  in  thi-.  in-ianee,  is  reeuirei;!.  1  f  'a  ii;- 
ter  \\"aL;e>  are  l-'Wer  than  sumnaer  \\aL;e^  it  i-  e\i'lei;t  tlial  th.e  e<  ■-!  nf 
Ii\;nL;  i-'anu"!  he  t';e  s.>le  ih/teiininant  ef  w;'.:;.--.  Winter  wa^e--  are 
lower  tiian  >",mmer  \\aL;es  in  all  trade-  that  depeml  e-'mple'ely  on  the 
sea-ons,  ami  nia\"  he  h'wer  in  other  trades  on  a>c<iuiit  of  iiicreased 
t'oinpet ;  ti'  'U.  \\  niter  wnLn--  are  Ln-ner.il!  v  1  >\\  er  in  (  'ana'!  a  tlian  siini- 
iiKT  waoe--,  ami  the  N'.orhini;   da\-  ii  iMl  ah^'ow-   slioiLer.      The  iiri\ers 


24  TJic  Bargain  TJuory  of  Wages. 


while  it  is  still  doubtful  whether  even  ^  post  hoc  is 
justified. 

There  are  many  industrial  facts  which  bear  out 
the  contention  of  the  theory  and  make,  at  least,  a 
prima  facie  case,  on  its  behalf.  \\c  have,  in  the 
first  place,  the  well-established  fact  that  wages  are 
highest  where  the  cost  of  li\'ing  is  highest.  City 
wages  are  generally  higher  than  country  Awages,  and 
although  this  may  be  in  part  due  to  the  greater 
efficiency  of  town  labor,  the  correspondence  between 
the  cost  of  li\-ing  and  wages  is  ton  extensi\-e  and 
too  marked  to  be  merely  accidental ;  and  the  corre- 
spondence ap])ears  not  oiil\-  when  we  compare  town 
and  countr\-,   but   also   when   we   compare  different 

on  the  street  railway  in  (^Juebec  City  are  paid  .se\'en  (lollars  in  summer 
aiul  five  dollars  a  \\eck  in  \\inter,  and  in  spite  of  the  .--horter  \\'orking 
.day  tlie  manaLjer  admitted  that  the  hands  "  earned  their  money  harder 
in  winter  than  in  summer."  'I'he  co^t  of  living;  in  Canada  on  account 
of  the  climate  nuist  be  at  least  one  thiid  higher  in  winter  than  in 
summer.  Canadian  Labor  ConiDiission.  (^)uehec  l'^\idence,  p.  S20; 
see  aI>o  New  Brunswick  ICvideiice.  {>.  479,  where  it  is  stated  that 
one  dollar  a  day  is  ]jaid  \w  winter  aiwl  a  dollar  and  a  cjiiarter  in 
summer. 

"  '^.  Why  are  the  wages  lower  in  winter  th.an  they  are  in  summer? 
A,  Simply  hecause  we  can  get  the  men  to  work  cheapier  in  the 
winter. 

"  Q.    I  )o  tliey  work  the  same  amount  of  time  ?     A.   Yes. 

"  '^).  ddien  tlie  ordy  reasnn  i-,  tliat  the  suprdy  is  greater  than  the 
demand  ?  A.  Ye--  ;  th.at  i-  all.  .Men  are  glad  t'l  work  f.  >r  a  dollar  a 
day  in  w  inter,  and  jirefer  to  work  f'jr  us  at  that  rate  of  wage.-i  than  go 
to  WMik  in  the  wor,.].-.'' 

d  I'-j  Cana'iian  win'c-r  recurs  with  a  certain  regidarity,  but  wages 
lia\-e  not  been  adiu-'ed  to  meet  the  increa^e<l  (_:' i.^t  of  li\-ing,  although 
the  mMte  ]irM-,idcnt  of  the  w(jrking  cla-ses  endeavor  to  adju-t  their 
e.xpendiiure, 


Evidence  ill  Support  of  Snbsistenee  I'heory.      25 


sections  of  the  couiitr\'.  Thus,  in  the  United  States, 
wa_L;cs  are  hi^^her  in  the  towns  than  in  the  country, 
l)ut  the\'  are  also  higher  in  the  West  than  in  the 
East.  In  the  latter  case,  the  hiL;her  cost  of  li\'ini( 
seems  to  l)e  related  to  the  hii^her  waives  as  cause  to 
effect.  The  annual  ax'erage  earninL;'s  for  the  whole 
of  the  United  States  is  $447.44,  but  the  earnin_L,^s  in 
the  Western  .States  are  far  abuve  the  ax'eraL^e,  reach- 
in;4'  in  \\'\'oniini,^  S'^^O^,  and  in  Colorado  $'"'S5.  ■'■  The 
followinL^  is  a  conii)arati\'e  statement  of  waives  in 
town  and  country  (165  towns  of  more  than  20,000 
inhabitants) : 

MKN.  W0NU;N.       CUUDRK-M. 

Town  average ^z^->l  '^j'-)'^  $'5<j 

l.^  S.        "        |ijS  276  141 

("lUiiitry    "         iDi  23(j  120 

The  fiL^ures  in  this  taljle  show  also  that,  on  the 
a\'era;4"e,  the  wai^'s  of  \\-omen  ai'e  lower  than  tlie 
wa^es  of  men.  The  reasons  wh\"  this  is  so  haxe 
been  abiindaully  discussed  and  a  pi'actical  a;^n'eement 
has  l)een  reached,  x'v/...  tliat  one'  cause  wh\-  the  wa'^es 
of  women  are  less  is  that  they  demand  less,  and  that 
the\'  demand  less  because  the\-  can  li\-e  on  less.  It 
m<i\-  be  tliat  the  women  of  tlie  u[')])er  clashes  insist 
on  a  hi;^lier  standard  of  comfort  th:in  the  men  of 
that  c!a<s  do;  but  the  women  who  e^arn  wa^^'e'S  do 
not  belong"  to  the  u[')per  cla-se>  and  [^^x  man\"  reasons 

*T)r.  Carrnl!  \Vri-!it,  fiM,,,  wli  .--  /;.'./// -/r/, 7/  AVv.V^//,-;  of  the 
l't!it,\i  St.-.tc.-,  ;>.  I'l'),  llio-r  li-;:c~  1 :  <■  m'.'-m,  -.ivs  \\v.\\  il^'  li-ure^ 
f.ir  Wv  'luiiiL,'  wv.A  ('-;Mi:vi>)  arc  ilia\'.n  [\"\\\  i."'  narrow  a  l)a^,ir^  to  be 
quite  repre.scntativi;. 


26  The  Bargain  Theory  of  Wages. 


have  fewer  requirements  than  the  men  of  their  class. 
In  the  first  place,  they  do  not  require  so  much  food 
to  nourish  them;  and  when  wages  are  so  low  that 
the  cost  of  the  bare  necessaries  of  food  absorbs  the 
larger  part  of  the  wages,  women's  wages  ma\-  be  at 
least  one  fourth  lower  than  men's.  The  fact  that 
they  can  live  on  less  makes  it  possible  for  them  to 
accept  less  and  yet  remain  as  efficient  as  they  were, 
while  male  labor  would  be  degraded.  In  the  second 
place,  a  woman's  standard  includes  more  of  those 
utilities  which  cannot  be  reduced  to  a  monc\-  meas- 
ure. The  wages  of  female  skilled  labor  and  female 
unskilled  labor  do  not  differ  so  much  as  the  wages 
of  male  skilled  and  male  unskilled  labor — the  reason 
being  that  the  female  sk'illed  trades  are  considered 
more  genteel  and  are,  therefore,  o\'er-crowded.  A 
girl  einployed,  say  as  a  bookbinder,  will  rather  sub- 
mit to  a  reduction  of  wages  than  consent  to  mix  \\'\\\\ 
the  lf)wer  social  class  of  workers  who  are  emi)loyed 
in  making  match  boxes.  Her  social  j)rejudiccs 
weaken  the  resistance  she  can  offer  to  any  attempt 
to  reduce  swages,  and,  consecpiently.  we  find  that 
the  wages  of  female  workers  never  depart  much  from 
the  a\'eragc.  The  relali\-el\'  high  wages  of  the  less 
skilled  trades  are  due  in  part  also  to  tlie  higher  real 
re'(juirements  of  these  workers.  Women  of  the 
lf)\\'er  class  who  seek  empli)\'ment  are,  as  a  rule,  en- 
tirely de])endent  on  what  the_\- earn  ;  and  they  must 
therefore  earn  as  much  as  will  cover  the  cost  of  lix'ing. 
The  wages  of  female  workers  in  a  more  skilled  trade 
are  used,  to  considerable  extent,  simply  for  dress  and 


Woiiicii's  JT/rccs. 


27 


})()ckct  nioiic)' — a  part,  sometimes  tlie  _<^reatcr  j^art, 
of  their  support  beini,^  (obtained  i^ratuitously  at  home. 
Conse([ueiUl\',  their  standard  of  h'x'iiiL^r  has  not  suffi- 
cient stability  to  en.d)le  it  to  resist  attempts  to  lower 
wai^'es.  In  tiie  tliird  place,  a  woman's  stanchird  of 
subsistence  is  fre([ueiUly  onl\'  a  personal  standard. 
It  is  indi\i(_lual  rather  than  social  because  she  lias 
oidy  herself  to  support  out  of  her  \va;^u.'s.  ^'\  man's 
standard  of  sul)sistence  includes  the  support  of  his 
dependents.  There  are,  it  is  true,  a  lar_L;e  number 
of  women,  widows  \\  ith  families  of  \-oun_i;"  cliildi'cn, 
and  others  who  ha\'e  to  ch)  more  than  merely  support 
themseK'es;  ])ut  these  fnrm  only  a  minorit\'  of  the 
workin;^' women  while  the  men  who  ha\'e  dependents 
are  in  the  majorit}'.  Men  are  thus  bound  to  offer 
effecti\'e  resistance  to  any  attenipt  to  lower  wai^^es. 
l'\unily  affection  is  a  stroivj,-  force  safei^uardini^^  the 
standard,  and  whei'e  it  is  operati\'e  helps  to  maintain 
wa;^"es  at  a  hi^h.er  level.  It  has  tlu:  greatest  (.:lTect  in 
maiiitainin;^  the  standard  when  the  f.imil\-  is  almost 
entire'K'  de[)endent  on  the  wai^u/s  of  the  breadwiuiier. 
Where  part  of  the  responsibilit\"  is  remo\x'd  fi'oiii 
Ids  shouklers,  because  the  dejx.'ndent  members  of 
the"  faiiiil}'  contribute  something,;"  to  the  famil\"  purse, 
his  power  of  maintaining;'  a  hii^li  uai^e  is  j.)roportion- 
ateU'  les^.  The  hii;her  wa;4es  are  not  so  mucli  re- 
(.[uii'ed  :ind,  conse([UentI\",  are  less  likel)-  to  be 
obtained,  because  le^s  fi'oin  the  bi-eadwinner  will 
ser\'e  to  maintain  the  tamil\-  --tan.dlard  of  comfort. 
It  is  curious  how  ckisel}-  famil\-  earninL;'s  ap[)i"i)xi- 
m.ite  to  an   a\"era_L;e.      It   is  [)ii..>ibjy  l.)ccominp;  less 


28  The  Bargain  Theory  of  Wages. 


true  that  the  family  is  the  wage-earning  unit ;  but 
where  the  head  of  the  house  is  not  the  sole  wage- 
earner,  his  wages  are  proportionately  less.  The 
annual  earnings  of  the  factory  hands  are  lower  than 
the  annual  earnings  of  the  worker  in  the  building 
trades  which  demand  an  approximately  equivalent 
efficiency ;  and  the  explanation  is,  that  of  the  de- 
pendents of  the  former,  1.25  per  family  are  con- 
tributing to  the  family  funds,  while  .25  only  of  the 
dependents  of  the  latter  are  engaged  in  gainful  occu- 
pations. The  wife  and  some  of  the  children  of  the 
factory  hand  accompany  him  to  the  factory,  the 
wife  of  the  carpenter  or  the  bricklayer  remains  at 
home  and  the  children  continue  at  a  school  until 
they  are  older. "^ 

These  facts  are  capable  of  receiving  a  two-fold 
interpretation.  The  man  who  follows  alternative 
trades  may  earn  as  little  at  the  two  as  he  could  by 
efficient  practice  of  either  one;  but  the  reason  he 
offers  for  his  conduct  is  that  it  is  the  only  way  to 
make  a  living;  and  the  man  who  sends  his  wife  to 
the  mill,  and  takes  his  cliildren  away  from  school  at 
an  early  age,  will  generally  justify  his  action  on  the 
ground  that  this  is  the  only  way  in  A\-hich  he  can 
make  both  ends  meet.  That  there  is  a  causal  effect 
between  the  standard  of  life  which  a  man  keeps  be- 
fore him  and  the  wages  paid  to  him  is  a  fact  be}-ond 
dispute  ;  but  which  is  the  cause  and  which  the  cfiect 
is,  by  no  means,  always  clear.  The  one  standard 
probably   acts  and   reacts  on   tlie  other.     And    the 

*  See  CJunton's   IVcalth  and  ]'r0i;riss,  p.  171. 


Practical  Motive  of  Modern  Subsistence  Theories 


dctcnniiiaLiou  of  the  direction  of  the  causal  relation 
has  not  been  rendered  easier  by  the  change  which 
haj)pier  industrial  conditions  have  br(ni<^dit  in  the 
theor}'.  The  operation  of  the  new  poor  law  destro\'ed 
the  old  economic  paradox;  and  the  L^n'owth  of 
wealth  and  the  rise  of  w.ii^uy  made  it  impossible  to 
assert  the  sul:)sistence  theory  in  its  earl}'  pessimistic 
form.  The  theoretical  excepti<jns,  which  Ricardo 
had  admitted,  were  brcnis^ht  out  from  the  back- 
i^round  and  made  much  of.  The  expansion  c)f 
I'lnL;iish  enterprise  aiul  industr\-  made  English  econ- 
omists aware  of  the  var\-in!^'  C(~>nditions  (jf  labor  in 
different  countries  and  the  wider  ex[)eriencc  seemed 
to  sui^L^est  that  the  hiL,dier  the  standard  of  li\-ing  the 
hii;iier  the  waives.  The  centre  of  interest  in  eco- 
nomic ([uestions  was  i^raduall\-  chan_L;'inL;"  from  wealth 
to  welfare,  and  the  L^^row-th  of  democracy  brouL^'ht 
int(^  pi'omineiice  the  ])ractical  pr(:)l)lem  of  the  best 
method  of  raising;"  waives.  The  welfcU'e  of  the  L^reater 
part  of  the  nation  de;)ended  on  the  amount  of  the 
necessaries,  comforts,  and  luxuries  of  life  the}'  could 
command  witli  their  wages,  and  the  practical  prob- 
lem of  r.u'^ing  wages  was  of  more  interest  than 
the  scientific  ])i'ob]em  of  the  law  of  A\'ages.  The 
first  conclusiou  to  wliich  a  comparison  of  interna- 
tional standai'ds  of  \\\c  ami  cumfoi't  and  interiiational 
wages  led,  \\'as,  that  -ince  tlie  liiglier  the  standard 
the  higher  tlu;  wages,  tlie  be-1  in''tii'>d  of  I'aising 
wag'es  HMs  first  to  rai-^e  the  -standard.  The  standard 
of  li\-iiigi)i-  sub-^i--t  ence  wliieh.  under  kicarl^f-^  as- 
sumption   that    wa;.a's    mu^t    fall,    liad    proxadcd    the 


30  TJic  Bargain  TJicory  of  Wages. 


socialists  with  their  most  powerful  criticisms  of  ex- 
isting institutions,  becomes  in  the  hands  of  the 
most  hopeful  of  modern  labor  advocates  a  lever  for 
raising  wages.  If  wages  depend  on  the  height  of 
the  standard,  the  practical  conclusion  is  to  endeavor 
to  create  new  wants  and  new  aspirations,  in  the  con- 
fident hope  that,  when  these  are  felt  and  adopted, 
wages  will  rise  in  proportion.  The  working  classes 
thus  seem  to  have  their  future  in  their  own  hands. 
It  is  no  longer  an  iron  law  under  which  they  live, 
but  a  law  which  their  own  voices  have  proclaimed, 
their  own  wishes  can  amend.  This  is  the  key-note 
of  the  policy  of  the  ethico-socialist  reformers  of  the 
da}',  who  declare,  if  we  may  take  Air.  Keir  Hardie 
as  their  spokesman:  "  Wages  are  determined  b}-  the 
standard  of  li\'ing.  If  you  impro\'e  the  condition  of 
the  men  you  make  a  higher  wage  necessary." 

The  theory  has,  therefore,  become  more  grateful 
to  our  modern  sentiments,  but.  unfortunateh',  at  the 
same  time,  in  the  process  of  transformation,  has  lost 
almost  entirely  what  of  scientific  \'alue  it  had.  The 
trutli  of  the  thcor}-,  in  its  earh'  form,  depended  on 
the  fact  that  there  was  a  limit  below  which  \\'ages 
could  not  fall  and  industr\'  continue.  Higher  than 
this  limit  thc\'  might  be  temporarily  :  lower  it  was 
im]:>os.-.ible  for  tliem  to  be.  Ricardo  was  not  in- 
clined to  la\-  stress  on  the  causes  which  raised 
market  wages  above  natural  wages,  and  ne\'er 
dreamt  of  an  application  of  the  theory  to  prcu'c  that 
market  wages  also  were  directly  determined  by 
\'ariations  in   the   standard.      This  is  really  what  the 


The  \Vcak)icss  of  the  Modern  For)H.  31 


modern  advocates  aUcni})t  to  show  rc^^ardiiic; 
(Ricardo's)  market  w.r^es.  The}- still  maintain  that 
the  standard  of  life  determines  the  minimum  below 
which  waL;'es  cannot  fall,  but  they  reject  altoi^cther 
the  assumption  that  wa^es  tend  to  fall.  Indeed, 
tliey  seem  to  make  the  contrary  assumption  that 
waives  luu'e  freedom  to  move  only  in  one  direction — 
upwards;  and  that  each  ste[)  of  proL^n'ess  is  irreversi- 
ble. Wdicn,  b\'  raisin;^  the  standard  of  life,  a  new 
minimum  has  been  created,  it  is  asserted  that  this 
new  minimum  has  all  the  tletermininL^f  power  on 
wa^i;e's  which  the  orii;'inal  [)hysioloi;"ical  or  industrial 
miiiimum  could  have.  The  raisin^'  of  the  standard 
of  li\"inL;'  is  a  practical  meth<^d  of  raisini;  wa<4'es  only 
if  the  new  minimum  thus  created  has  all  the  perma- 
nence and  stabilit}'  of  the  old.  The  new  minimum  is 
not  based  on  an)'  [)h\-sical  nccessit)-,  or,  as  }-et,  on  any 
industrial  necessity;  but  it  must  become  at  once  so 
hrmly  entrenched  behind  the  customs  antl  habits  of 
men  that  it  can  oiler  a  \'ery  serious  resistance  to  any 
attemi)t  to  reduce  wa;_;"es  Ijelow  the  amount  which 
would  permit  lite  accordin!:^  to  the  new  standard.. 
The  new  minimum  must  at  (^nce  attach  to  itself  all 
the  determining'  [)ower  of  the  old  ;  but  it  can  do  so 
only  b\-  creatine^'  habits  antl  dispositioiis  as  sti'oni; 
aiul  tenacious  as  the  habits  and  di--po>iUons  which 
ha\'e  l^een  outL;rown.  The  creation  of  new  wants 
and  aspirations,  s^)  stron;_;'  tliat  the_\-  ha\-e  all  the 
force  of  entrenched  liabit-^.  a!rh')U;.di  thei'e  is  a-^  \'et 
no  means  of  sal  i:-f\'ini;  iIkso  want>  .md  aspirations, 
is  not  to  be  accompli>hed  in  a  week  or  a  \'ear.      W'c 


32  TJic  Bargain  Theory  of  Wages. 


may,  of  course,  fix  v/ages,  as  Air.  Kcir  Hardic  de- 
sires, by  legislation,  at  the  living  wage  of  three 
pounds  per  week,  and  trust  that  the  increased  op- 
portunities which  the  higher  wages  afford  will  enable 
the  wage-earners  to  form  a  new  habit  of  life  in  which 
new  and  higher  wants  and  aspirations  have  a  proper 
place;  but  that  is  legislation,  not  wages  theory.  On 
the  contrary,  it  is  an  explicit  contradiction  of  the 
subsistence  theory,  which  requires  that  higher  wages 
shall  follow,  and  be  caused  by,  the  higher  standard 
of  living.  With  the  advisability  of  such  legislation 
Ave  are  not  concerned,  except  in  so  far  as  the  pro- 
posal illustrates  the  difficulties  into  which  the  more 
hopeful  form  of  the  subsistence  theory  leads  us. 
\W'  have  to  reconcile  a  doctrine  which  professes  to 
show  a  method  of  raising  wages  with  a  theory  which 
declares  that  there  is  a  minimum  below  which  wages 
cannot  fall. 

It  is  obvious  that  the  reconciliation  cannot  be 
affected  by  supposing  the  universal  and  immediate 
adoption  b\-  the  v^'hole  of  the  working  classes  of  the 
proposed  additions  to  the  standard  of  li\-ing.  Such 
a  supposition  \\'ou!d  be  contradicted  both  b\-  history 
and  b\'  moral  thet)ry.  Wholesale  conversions  do 
not  usual!)'  involve  any  serious  change  of  heart. 
The  masses  are  ne\'er  elevated  at  once,  but  by  the  old 
and  familiar  wa\'  of  making  giants  and  lea\-ing  it  to 
them  to  elevate  the  mass.  New  wants  and  aspira- 
tions will  at  first  be  felt  by  but  a  few — too  few  to 
bring  an\'  serious  infiuence  to  bear  on  the  labor 
market.      Consequenth',  if  the  creation  of  new  wants 


J/r.  G 11  )it oil's  ]\'}-s{on.  33 

and  aspirations  is  to  be  a  pi"actical  niuthod  for  rais- 
iiiL;'  waL;"cs,  it  must  be  sup[)()sccl  to  clfcct  the  puri)osc 
in  some  indirect  way  :  for  directly  and  ol)\iousl\'  the 
effect  of  new  wants  must  at  ilrst  be  infmite'simal. 

Mr.  Gunton  has  endea\'ored  to  restore  the  subsis- 
tence theory  to  the  rank  of  a  scientihc  exphmation 
of  waives.  It  was  rapidly  becomiuL,''  a  mere  pious 
o[)inion  and  it  was  necessar)*  to  restoi'e  the  necessity 
and  determininL^  power  ^\hich  the  theory  had  in  its 
earliest  stai^es,  in  some  wa\-  consistent  witli  tlie  i)rac- 
tical  aim  which  had  come  to  be  associated  with  the 
theory.  The  evidence  which  can  l)e  ^'i\'en  in  fax'or 
of  the  theor\-  is  not  C(Miclusi\e  till  it  has  been 
demonstrated  that  the  standard  of  life  can  determine 
waives:  until  this  has  been  shown,  the  concomitant 
variation  of  wai:^es  an.d  standards  does  not  \'ield  the 
desired  conclusion.  ^Ir.  Gunton  faces  his  difficulty 
biild!}-  and  dechu'es  that  "  the  cliief  determinin;4"-  in- 
tluence  in  the  Li.'eneral  rate  of  waives  in  an\-  countr\", 
class,  or  industr\-  is  the  standai'd  of  li\-inu;  of  the 
most  expen.^i\'e  families  fui"iiishinc;"  a  necessary  part 
of  tlie  suppl)'  of  labor  in  that  country,  class,  or  in- 
dustry ":  or,  as  he  sa\"s,  more  bi'iell}-.  Liter  on  the 
same  pasi^e.  "  the  minimum  amount  upon  whicli  the 
most  exi)en>i\"e  hil)oi'ers  will  consent  to  lix'e  detei'- 
mines  the  L;'eneral  rate  of  w,i_i;'es  in  tliat  class."  ■■■ 
We  ma\'  translate  this  into  ;i  newer  termim 'lo::;\-, 
and  .-^a}'  that  the  \\ML'"es  of  laboi'  are  cK'ternn'ned  b\- 
tile  mai'L^inal  su[)pl\-  })rice  of  labm'.  Mr.  (junton. 
howxwer,    seems   to    haw    brcn    mi-leij   b\-  iinaloL;\'. 

*  Ciu'.lt'dl's    ll\\:J'j  iT/h/  /'/\\'',ss,  \\  09. 


34  TJie  Bargain  Theory  of  Wages. 


The  marginal  supply  price  of  any  commodity  is  the 
price  at  which  the  most  expensive  portion  of  the 
commodity  can  be  sold.  ]\Ir.  Gunton,  applying  this 
conception  to  labor,  claims  that  the  marginal  laborer 
is  the  laborer  with  the  highest  standard  of  living. 
He  may  be  so,  but  not  necessarily.  The  marginal 
laborer  is  the  laborer  who  is  on  the  margin  of  not 
being  employed ;  and  whether  he  shall  be  employed 
or  not  depends  on  whether  his  employer  thinks  it 
w^orth  while,  considering  the  price  of  the  commodi- 
ties which  he  will  be  engaged  in  producing,  to  em- 
ploy him.  It  is  not  a  matter  of  indifference  to  an 
employer  which  laborer  is  the  marginal  laborer.  In 
slack  times,  it  is  the  inefficient  workman  who  is  the 
first  to  be  dismissed  and  the  efficient  workman  who 
is  surest  of  his  place.  This  is  because  the  employer 
has  formed  his  own  personal  estimate  of  what  the 
man  is  worth — an  estimate  which  is  not  final  and 
may  be  modified  by  the  attitude  ^\•hich  the  laborer 
chooses  to  take.  An  efficient  workman  who  has 
rendered  himself  obnoxious  by  agitation  and  com- 
plaints has,  from  the  emploA'cr's  point  of  view,  so 
much  the  less  efficiency.  In  the  main,  howe\'er,  it 
is  an  estim;ite  of  efficiency  that  determines  who  is 
the  marginal  laborer.  As  a  general  rule,  the  lower  a 
man's  standard  of  li\'ing  the  less  his  efficiency,  and 
the  higher  his  standard  the  better  is  he  at  his  work. 
The  laborer  with  a  high  standard  of  li\"ing  is  thus 
not  the  marginal  laborer  \\-hose  earnings  determine 
the  genera!  rate  of  wages.  The  real  marginal  laborer 
is  he  who  "  adds  to  the  total  produce  a  net  value 


TJic  Man:inal  Laborer. 


35 


just  cqu.il  to  his  <nvii  wa^cs,"  ■••  and  is  tluis,  under 
the  actual  conditions  of  industr\',  the  least  efficient 
workman  employed.  Accordinj^ly  because  the  least 
efficient  \\n)rkman  is  also,  i;enerally,  the  workman 
with  the  lowest  standard  of  living;,  if  the  standard 
of  li\'ini;"  of  the  most  expensive  kd)orer  is  to  be 
tcd<en  as  the  determinant  of  wac^es,  the  standard 
must  be  that  of  the  least  efficient,  not  of  the  most 
efficient.  Mr.  Gunton  adduces  in  support  of  his 
contention  the  fact  the  natix'e  workman  in  Amei"- 
ica,  who  has  the  higher  Aiuerican  standard  of 
livini;",  can  barel)'  do  as  much  as  make  both  ends 
meet ;  while  the  immigrants,  with  a  lower  standard, 
can,  on  the  same  waives,  sa\-e  money  and  accumu- 
late propert}'.  "  Wduit  the  most  expensi\'e  ])or- 
ti(.Mi  of  a  i;'i\'en  class  must  recei\'e  the  balance 
may  and  will  recei\'e. "  ■i'  In  this  way  the  law  i;> 
;4i\'en  determinini;'  power  and  to  the  threat  body  of 
labor  becomes  beneficent.  All  thc^se  w]u)se  staiuiard 
falls  sh<jrt  of  the  hii^hest  can,  accordini;"  tc^  their 
ideas,  li\-e  on  their  wai^'es  in  comparatix'c  aftluence, 
while  onl\-  a  select  few  feel  the  pinch  of  circum- 
stances. "  There  is  nothini;","  he  continues,::}:"  in 
the  nature  of  this  law  to  pre\'ent  the  rate  of  wa^es 
from  risin;4  to  fi\'e  tlunisand  dollars  as  well  as  to  h\'e 
hundred  tlollars  a  \'ear."  An.d  the  fact  that  there 
is  nothiiiL^r  in  the  law  to  prewnt  or  to  show  that 
such  a  rise  under  an\-]<n<)\\n  conditions  i>  impos- 
sil)le,  shows   the   law  to  l)e   c<tmparati\'ely   meaniiv^- 


2)6  TJic  Bargain  Theory  of  Wages. 


less.  The  total  national  dividend  out  of  which  the 
expenses  not  of  the  working  classes  only,  but  of  the 
whole  of  society  must  be  met  is  not  sufficient, 
dix'ided  share  and  share  alike,  to  give  such  an  aver- 
age wage.  Xo  doubt  from  an  increased  product, 
and  out  of  a  larger  national  dividend,  a  larger  abso- 
lute, if  not  also  a  larger  relati\-e  share,  may  go  to 
labor;  and  a  higher  standard  of  lix'ing  among  the 
working  cla-scs  will  no  doubt  result  in  an  increase 
of  efficiency  and  indirectl\',  through  consumption, 
make  it  possible  to  pay  high  wages;  but  the  increase 
arising  in  this  way  will  not  be  very  great.  The  in- 
crease of  the  product  of  industry  which  has  taken 
place  \\-ithin  the  last  fort}-  }-ears  has  been  due,  per- 
haps, more  to  the  increased  use  of  capital  in  manu- 
facturing than  to  an  increase  in  the  efficiency  of 
labor;  and  there  is  no  reason  ^\■hate\•cr  for  sup- 
posing that  tliere  will  be  in  tlie  future  a  greater  pro- 
portional increase  of  efficiency  than  there  has  been 
in  the  pa-t.  At  any  rate  a  rise  of  the  a\'cragc  wage 
to  \w^  thousand  dollars  a  \-eru'  can  be  rendered  pos- 
sible op.h'  b\-  ;in  enormous  increase  oi  efficiency: 
directlw  the  standard  of  li\-ing  alr)ne,  however 
powerful  as  a  determinant  of  wages,  is  quite  in- 
caj^ablc  of  r,ii-ing  average  wages  to  e\-en  the  fifth  of 
that  sum.  Tb.e  optimism  of  tliis  practical  form  of 
the  the'or\-  is  so  '.'xtrenie  tliat  it,  in  effect,  denies 
that  tlierc  is  any  labor  (piestifJU  at  all.  The  ju-ob- 
lems  of  di;-tributie'n  ari.-'e  only  bec;insc  the  national 
dividend  is  limited  in  amount.  Mr.  Gunton  not 
oni\-   i'-nore-,  the  existeiice  of  other  claimant.-,  for  a 


The  DLiiuvtd for  Labor. 


Z7 


share  of  the  di\'i(-!ciul,  but  assuiiics  tliat  the  di\-icleiul 
itself  is  hu'L;e  en()ui;h  to  nial^e  it  possible  for  the 
\vt)rkini;"  classes  to  raise  their  demands  I;uleti;iitely 
and  ha\'e  them  met.  It  is  true  that  if  the  efllciencx' 
of  industrx'  is  increased  b\'  a  ri^e  in  the  .-^tandcU'd  ul 
ii\'in^  a  lar;.;'er  a\-ei'ai;e  \\aL;"e  ma\'  be  paid;  Init,  in 
ihus  a^L;•uinl^^  we  ha\'e  aband(-MU'd  the  original  thiiory 
of  waives  and  ad(M^)ted  in  its  place  a  modified  form 
of  the  later  theory  which  makes  the  producti\'ity  of 
labor  the  me.'isure  of  \vat;"es. 

A  more  sei-ious  defect  in  Mr.  Gunton's  theoi'x'  is 
that,  in  ordi:r  to  obtain  that  permanence  in  the 
standard  to  make  it  th.e  final  deterndnant  (jf  \\cii;es, 
he  enlirelx'  i_L;"nores  the  demand  for  labor.  lie 
writes  as  if  he  Ir.ul  ado[)ted  without  ([u.dification 
tlie  trade-uniiiii  and  workinj^-class  fallac}'  of  the 
Luniip  of  W'oric,  which  is,  that  there  is  a  certaiii 
ami'unt  of  \\'ork  t  )  l)e  cl^ne  whicli  will  be  done  no 
matter  wliat  the  co.-^t.  IX.niand,  ;is  .Mill  jviinted 
out,  thou^'h  he  tiii--_^()t  his  own  di-tincti; mi  when  ht; 
wi'ote  on  wa_L;"es,  is  always  relation  to  price;  and  if 
labor  has  ;i  >up;)l\-  price  it  has  a!-o  a  deuiau'd  price. 
The  exirtence  ot  a  demand  jjrice  must  \'er\-  seriou.d)' 
.uTect  the  al-MJil}-  of  the  W' n'l-cin,;"  clas-es  to  determi-^iC 
Waives  aicordiini;"  to  their  wislics.  If  t!ie  deiViand 
weri-  fixed  and  in\"ari.d)K-,  the  permanence  of  tkic 
stcUidard  of  lite  cmuUI  be  a-^umed  rnul  the  hi^dier 
standiard  wurd.;.  as  A'r.  (iunton  ckiiiu-^,  d.elermine 
the  wa;.;e-^  U)V  all.  In  a!i  (^peu  mai-k'et  alllahnrof 
the  same  tlcL'ree  df  (.tficienc}'  will  be  paid.  ;it  the  one 
rate.      If   the   demand   i-^  >utficicnt.  .end    will   r^'uiain 


38  TJic  Bargain  TJicory  of  Wages, 


under  all  conditions  sufficient  to  carry  off  the  sup- 
ply, the  rate  of  wages  will  be  determined  by  the 
supply  price  of  the  most  expensive  portion.  But 
what  happens  if  the  demand  is  not  fixed  and,  under 

given  conditions,  is  not  sufficient  to  carry  off  all  the 
supply  ?  The  first  effect  is  a  trial  of  strength  be- 
tween the  standard  and  the  tendency  of  wages  to 
fall.  The  laborers  with  the  highest  standard,  ac- 
cording to  j\Ir.  Gunton,  being  the  marginal  laborers, 
will  be  the  first  to  go.  If  they  are  willing  to  accept 
a  lower  wage  which,  ex  Jiypotliesi,  is  too  low  to  cover 
their  expenses,  they  have  the  same  chance  of  em- 
ployment as  the  others.  If  they  obstinately  hold 
by  their  standard  they  may  find  themselves  out  of 
work;  and,  though  it  is  labor  that  is  bought  and 
sold,  the  laborer  must  live  by  the  price  of  labor. 
There  is  a  great  strength  in  the  position  of  any  bar- 
gainer who  stands  out  for  a  price;  and,  other  things 
being  ecpial,  he  is  likely  to  obtain  the  price  he  de- 
sires. But  in  the  case  of  labor  other  things  are 
not  ecpial;  and  the  onh^  force  on  whose  operation 
the  kib(M'cr  can  depend  to  make  good  his  demand  is 
the  difficult}-  the  bu\'er  of  labor  has  in  finding  a  sub- 
stitute which  will  scr\'e  his  purpose  equally  well. 
No  man  can  claim  to  be  indispensable,  and  the  in- 
convenience there  is  in  finding  a  substitute  for  an 
unwilling  workman  is  never  \'ery  great.  The  mar- 
ginal laborer  must,  therefore,  when  the  demand  for 
labor  falls  off,  either  lower  his  tlemands  or  be  con- 
tent to  stand  aside;  for,  b\'  Mr.  Gunton's  hypothesis, 
the  marginal  laborers  are  few  in   luimber,  and  noth- 


TJic  Necessities  of  the  Laborer. 


39 


ing  lias  been  said  about  efficiency.  If  the  standard 
for  which  a  striiL;'i;"le  is  beini;'  made  has  been  adopted 
by  thousands,  and  if  each  kdjorer  of  the  thousands 
is  resohitel)'  steadfast  in  deniandini;  a  wage  which 
will  enable  him  to  li\-c  u})  to  the  standard,  a  proposal 
to  reduce  wages  may  be  successfull)'  resisted,  be- 
cause the  trouble  and  incon\'enience  of  finding  srib- 
stitutes  for  so  man}-  is  \-er\-  gi'eat.  I'his  is  probabh' 
one  reason  win-  it  has  Ijeen  possible  to  maintain  the 
.Vmerican  standard  of  li\ing  in  spite  of  the  C()m[)e- 
tition  of  low-class  immigi-ant  labor.  ■■■ 

The  solution  of  the  difficult}',  however,  is  not  far 
to  seek.  The  marginal  laborer  is  not  necessarily 
the  laborer  with  the  highest  standard  of  li\-ing. 
I'lxperience,  on  the  contrar\',  shows  that  the  mar- 
ginal Icdjorer  is  aluK^st  inwiriabh'  the  laljorer  with  a 
low  standard.  The  em[)loyer  takes  into  account 
when  he  buys  labor  the  efficiency  of  wliat  he  Lni}-s : 
and  thus  there  is  a  tlemand  i)rice  as  well  as  a  sup- 
pl\-  jirice.  The  standard  of  lix'ing  is  therefore  not 
the  sole  determinant  of  wages.  In  the  absence 
of  a  fixed  demand  for  labor,  the  standard  of  the 
laborer  is  not  stable  and  permanent  enough  to  make 
it  im[)ossible  for  wages  to  fall  below  what  will  admit 
of  this  standard.  I'he  force  on  wliich  the  laborei' 
must  rel}'  to  obtain  what  he  demantls  is  not  the 
strength  of  his  desire--,  lii-^  wa;it>.  or  hi-^  ]i,d.)it<,  Init 
tlu>  ine\-it,d)le  incon\'enience  to  the  eniplo\-er  in  re- 
placing him.  If  the  st.uulard  ha-;  hvcw  widLJ}- 
atlopted.  and  is   strenuous!)-  maintainetl.  the   inccni 


40 


The  Bargain  Theory  of  Wages. 


vcnicnce  may  be  so  great  as  to  counterbalance  the 
possible  gain  to  the  emplo\-er  from  a  deduction  of 
wages.  The  standard  of  lix'ing  is  thus  not  a  mini- 
mum belo\\'  which  wages  cannot  in  any  e\-ent  fall, 
but  a  conception  which  each  laborer  has  formed  of 
his  own  merits  or  of  A\-hat  his  labor  is  worth  and  b\' 
which  he  is  prepared  to  stand.  If  need  be  he  will 
accept  less,  as  a  merchant  may  sell  his  goods  for  less 
than  cost  to  avoid  a  greater  loss;  but  the  laborer 
will  be  as  anxious  as  the  merchant  to  avoid  this  con- 
tingency. He  can  accept  less  temporarih-,  because 
he  can  support  physical  life  on  less;  but  the  more 
firmly  he  is  attached  to  his  standard  the  greater  the 
resistance  he  will  oppose  to  any  attempt  to  force 
wages  bel(.)\\"  it.  He  is  not  in\'arialjly  successful  in 
his  opposition,  ris  the  strike  returns  show.  He  is 
apparent!}',  howe\"er,  cdmost  as  often  successful  as 
unsuccessfvd.  The  peculiar  positi'jn.  of  tlie  laborer 
probably  renders  it  more  difficult  for  him  than  for 
other  vendors  to  enfcjrce  his  estimate  of  wliat  he 
sells.  In  man\-  cases  the  seller  of  a  commodity  may 
withdraw  part  of  the  supph',  as  the  Duitch  jjlanters 
dustrr)ycd  the  spices;  but  the  laljorer  has  nr)t  the 
s'lme  freed  im.  It  is  generalh/  asserted  that  e\er\- 
laborer  niu>t  work  and  must  work  immediatel\- :  and 
th;it  coi^isequenll}-  lie  is  dependent  for  enfr)rcing 
his  estimate  of  wln.it  he  sells  on  the  effect  which 
the  pro-r)ect  of  inconx'enience  has  on  tlie  mind  of 
jiis  t-mpniver.  How  far  the  assertion  i^  coi'i'ect  we 
shall  inquire  in  next  chai)ter ;  for  this  is  one  of  the 
cardinal  jjrojjo-iiidiis  of  the  Wages-Fund  '1  heor\-. 


CIIAPTKR    II. 


Till']  \v.\(,i;s-i-rM)  'i-!ii;()Rv. 


IT  is  hardly  possible  to  draw  a  rii;"id  line  of  distinc- 
tion between  the  Subsistence  Theor\-  and  the 
Waives- h\ind  Theory;  f(-)r  the  two  theories  arc  not 
nuitu.dl\-  exclu>i\e,  and  indeed,  sometimes,  are'  held 
l)\-  the  same  writer.  The  distinction  is  to  a  larL^e  ex- 
tent a  matter  of  the  relati\'e  empJKisis  laid  1)\'  the  par- 
ticular writer  on  the  separate  tei'iiis  o(  Ivicardo's  con- 
tra;t  between  market  and  n.;itural  \\;iL;"es.  Natural 
wa;j,'e-^,  he  had  described  as  bein^'  such  as  would 
maintain  the  race  'if  laljoi'crs,  and  such  as  would  be 
paid  in  a  stationary  societ}'.  ^^farket  wa;4'e-<,  on  the 
other  hand,  mAV.  in  an  inaproxan;^  societ\',  for  an  in- 
definite ])i.aa'i  xl,  be  constantK' ab(i\"e  the  natural  rate; 
and  siiciet}'  during"  the  tlrst  half  of  this  centurx'  \\ais 
distincti)'  impi'oxans^.  ■'  Kicaialo  h.id  dexadoped,  with 
propci'  emphasis  and  with  the  proper  the:iretical  ex- 
cei)tii)n-,  the   theo 


)t    wac'es  which    exnlaine 


tne 


nidu^trial  --iluatiMn  ilowii   to  iii.-;  own  [)eriiid;   and    it 

*  1  he  in;; '!■' ivc:'.:o;it  ■.'.■.\-  iii'i  t'^ii; ;:;;;' ■';-,  n-ir  \".  ,i.-^  it  ^n  inarkcil  in 
^Mnlt.■  lie' ':\i ;  lufiit-  a--  in  "■.hi.i-,  l-;;!,  nLVciihclcs^,  the  cii-iraclci  i.-^tic  of 
tile  h.ilf-i;c;i;;;;  V  v.  ,i>  [f' 'l^ic--. 

41 


42  TJie  Bargain  TJicory  of  Wages. 


was  to  be  expected  that  Avhen  industrial  conditions 
changed  for  the  better  the  theory  of  wages  would 
also  become  less  pessimistic.  After  the  close  of  the 
war  period  it  was  seen  that  wealth  was  increasing 
faster  than  population;  and  Ricardo's  theoretical 
case  was  consequently  everywhere  actually  reaHzed. 
Market  wages,  therefore,  rather  than  natural  wages 
was  the  subject  of  discussion  and  investigation,  and 
the  theory  of  wages  which  was  gradually  formulated 
by  economists  between  Ricardo  and  J.  S.  Mill  was 
explicitly  a  theory  of  market  wages.  The  doctrine 
of  natural  wages  was  not  rejected.  It  still  formed  a 
gloomy  background.  Natural  wages  were  the  mini- 
mum to  which  the  incontinence  of  the  working 
classes  might  reduce  wages ;  but  it  was  not  consid- 
ered necessary  to  discuss  the  minimum  in  the  course 
of  the  treatment  of  market  wages,  any  more  than  a 
publicist  would  consider  it  necessary  to  interpolate 
a  reference  to  physical  force  in  a  treatise  on  repre- 
sentative government.  An  exaggerated  Malthusian- 
ism  made  it  possible  to  maintain  the  older  theory 
while  discussing  the  new. 

It  might,  in  a  sense,  have  been  possible  even 
without  the  assistance  of  the  Malthusian  doctrine  to 
maintain  both  theories;  for  each  attacks  a  different 
part  of  the  Wages  Question.  Wages  ma}'  be  con- 
sitlered  from  two  points  of  \-iew — as  the  share  of  the 
prothict  or  income  of  socict}'  whicli  is  idtimately 
allotted  to  labor,  or  as  the  amount  of  the  commodi- 
ties read}'  for  consumption  ^vhich  the  indi\'idual 
laborer  is  able  to  obtain.    The  problems  of  wages,  and 


Genera/  IWrgcs  and  Wages  per  Head. 


43 


wa<^cs  per  head,  arc  ({uilc  distinct.  The  first  involves 
a  discussion  of  general  wattes  which  may  result  in  a 
discussion  of  a\'er.ii;"e  \\a_14es,  and  the  second  a  discus- 
sion and  description  of  the  causes  win-  ^\'s  wages  are 
such  and  such,  and  more  or  less  than  IJ's.  The 
\\'aL;'es-l'\ind  'Iheory  discusses  the  proljlem  of  i;en- 
eral  wa^es  fully,  but  adds  little  or  nothing;  to  the 
discussion  of  particular  wages.  It  is  a  theor\'  re- 
garding the  source,  idtimate  or  deri\-ati\'e,  from 
which  wages  are  paid,  rather  than  a  theor\-  explain- 
ing the  actu;d  differences  of  ^\'agcs  recei\"ed.  The 
Wages- l*\ind  Theorists  do  incidentall}',  and  some- 
times in  length}'  chap-ters.  discuss  the  causes  of  the 
diffirrence  of  wages;  but  the  treatment  they  gi\'e  to 
the  problem  is  ax'owedl}-  supi)lementar}'.  The  sub- 
sistence theor)-,  on  the  other  hantl,  is,  in  the  main, 
a  theory  of  pai'ticular  \\'ages.  While  the  minimum 
was  interpreted  strictl\-  as  a  phx'sical  minimum,  the 
early  thei>i-_\-  ma}-  be  regai'ded  as  dealing  l)oth  uith 
particular  and  with  general  w.iges.  The  same  cause 
which  determined  general  wages  also  determined 
— accidents  and  theoi'etical  excejitions  apart-  -the 
wages  whicii  each  m,m  recei\"ed.  With  cvcvy  change 
in  the  direction  of  the  recog;ulion  of  the  stand- 
ai'd  of  lift'  as  elastic,  the  ^ubsi-tence  theor}-  became 
more  and  more  a  the(M-\-  (^f  particular  wages;  and 
the  general  ])r(^blem  was  iU'L;]ected.  TIk'  [)roblem 
of  the  determination  of  the  particular  wa.ges  is  un- 
doubted!}' the  more  intei'esting  of  the  two.  hv\\.  it 
is  barren  of  scientitlc  result <.  The  causes  of  the 
dilferences  of  waLies  are  scj  \-arious  that  an  iiue:-tiL''a- 


44  TJie  Bargain  Theory  of  Wages. 


tion  of  them  will  not  readily  yield  any  law  of  more 
than  temporary  and  local  significance.  The  diver- 
sion of  the  attention  of  economists  from  particular 
to  general  wages,  though  it  made  political  economy 
abstract  and  "  dismal,"  was  a  real  gain  to  economic 
theory.  When  the  growing  prosperity  of  the  nation 
caused  the  abandonment  of  the  notion  that  the 
standard  of  life  was  fixed  and  permanent,  the  scien- 
tific value  of  the  early  theory  went  out  of  it;  and  it 
became,  as  was  said  above,  merely  a  theory  of  par- 
ticular wages.  The  Wages-Fund  Theory  took  up 
the  scientific  problem  and  devoted  itself  mainly  to 
a  discussion  of  the  source  from  which  wages  are 
paid  and  of  the  kuvs  Vv'hich  govern  the  amount  of 
the  wages  fund.  It  makes  no  contribution  which 
is  worth  serious  consideration  to  the  discussion  of 
particidar  wages.  It  gives  us  merely  an  arithmetical 
average  which  has  no  practical  bearing,  and  a  general 
enunciation  that  particular  wages  can  only  rise  or  fall 
at  the  expense  of  other  wages.  ?Jill,  indeed,  does 
give  a  suppleinentary  chapter  ( in  A\'hich  he  follows 
Adam  Smith  very  closely)  to  a  discussion  of  the 
causes  of  differences  in  wages,  but  the  causes  he  finds 
at  work  do  not  find  their  ultimate  explanation  in  the 
Wages-Fund  Thcor\-.  The  problem  of  general  wages 
is  the  only  one  of  scientific  importance  and  it  is  highly 
desirable  that  the  two  |.)roblems  should  be  kept 
(li.-^tinct ;  but  it  is  not  desirable  that  the  solutifMis 
of  the  separate  problems  should  ha\'e  no  connec- 
tion the  oivj  with  the  other.  The  particular  causes 
of   the  differences    in    wages    should    be    shown   to 


Wngt's-Fiiud  TJicory  and  Particular  Wages.      45 


be  cases  under  the  law  of  i;"eneral  wa^^es  and  not 
treateel  as  if  the}'  wei'e  iiuUjpendent  Laws  of  waives. 
The  Waives- h'und  Theoi'y  has  no  phice  for  tliese 
particuhir  hiws;  and  it  treats  theni  as  if  they 
were  supi)!enie:Uar\-  hiws  l)i'(ni<4"ht  in  to  ex[)lain 
what  tlie  \\'ai;"es-l*'uiul  Theory  cannot  he  made  to 
cx[)hun.  Tile  \\'ai;es-I'\i!Kl  Tlienr\'  was  unclouljt- 
edlv  thou!_;"ht  to  exphiin  particuhir  wai^'es.  It  was 
constant!}',  in  its  popuhu"  version  (or  perx'crsion), 
used  as  an  ari^unient  a;^ainst  trade-unions,  for  in- 
stance, and  the  possible  intluence  of  trade-unions  on 
particular  wai^'cs ;  and  Mill  himself,  when  he  pro- 
poses to  discuss  facts  in  apparent  contradiction  with 
the  theor}',  x'irtuail}'  uiakes  the  claim  that  the  L(en- 
eral  law  of  waj^es  does  include  and  explain  the  ])ar- 
ticular  causes  of  tlie  actual  \'ariati<^ns  in  was^'cs.  ISut 
his  explanations  are  either  uncoiua'ncinL;,  if  consistent 
witli  lu's  L;\'neral  theiir}-,  or  inconsistent  with  the 
thei  MA'  if  ci  MU'inciu'j;. 

Tlie  Sut),^i-tence  Theor}'  and  the  \\'aL^es-h\ind 
Theor}'  an.',  howe\'er,  as  \\'e  saw,  not  mutually  ex- 
chi--i\'e,  and  tlie  latter  theoi-}-  was  dewlopcd  too 
ch>-el}'  under  the  intluence  (T  the  Malthusian  doc- 
trine e\'er  to  be  placed  in  ojiposition  to  tlie  earlier 
tlieor\'.  Ricardo  had  (h.'fined  crqiital  as  "  that  j^art 
of  the  wealth  of  a  countr\'  which  is  emplo\-od  in  pr(^- 
ducti-Mi,  and  con-;i-.t-^  of  f>>id,  i  !■,  iihiivj,".  to;)]-;,  raw 
matfi-ial,  machini-r\',  etc.,  nece-^-arx'  to  i;'i\'e  cttect  to 
lah' M'  ""'■'■ ;  and,  --inoe  'lie  nv)-;;  ob\a'ous  wa\'  in 
which  ca{)ital  is  "  neC(-;-ar\'  tn  L:,i\'e  effect  to  labor  " 
*  Kicafil.i,  /''■■/'/r/,".'.-  .-.  p.  "2. 


46  TJic  Bargain  TJicory  of  Wages. 


lies  in  suppl}'ing  the  laborer  with  the  means  of  living 
during  the  extended  process  of  production,  Ricardo, 
to  whose  analytic  mind  the  less  essential  was  the 
practically  non-existent,  naturally  came  to  resolve 
all  capital  into  food.  Thence  it  was  but  a  step, 
and,  under  the  influence  of  Malthus,  an  easy  step, 
to  the  position  that  wages  depended  at  any  moment 
on  the  proportion  of  the  amount  of  food  or  capital 
to  the  number  of  laborers  in  the  community;  and 
this  is  the  essential  doctrine  of  the  W'agcs-Fund 
Theory.  The  progress  of  the  working  classes  had 
taken  awa\'  from  the  subsistence  theory  that  ele- 
ment of  necessity  and  permanence  which  it  ap- 
peared to  possess  in  the  notion  of  a  physical  mini- 
mum ;  and  Ricardo's  definition  and  use  of  the  term 
capital  seemed  to  gi\'e  back  again  the  element  of 
necessity  which  had  been  lost.  The  older  form  of 
the  theory  had  relied  on  the  absoluteness  of  the 
principle  of  population;  but,  with  admission  of  a 
moral  check,  no  permanent  obstacle  to  an  indefinite 
rise  (jf  wages  seemed  to  remain.  But,  when  Ricardo 
accei)ted  unquestioned  the  assumption  made  by 
Adam  Smith  that  wages  ^\■ere  paid  out  of  capital, 
and  i)racticalh'  limited  capital  to  the  food  necessary 
to  gi\'e  effect  to  labor,  a  new  and  in.exorable  limit 
and  obstacle  could  be  placed  to  the  rise  of  wages. 
The  intention  of  the  capitalist,  who  had  the  riglit 
to  do  what  he  liked  with  his  own.  rather  than  the 
continence  of  the  working  classes,  became  the  real 
determining  force.  Thus  again  the  law  of  wages 
was  made  to  depend  on  a  force  strong  enough  to 


Tlic  Wages-Fund  Tlicory.  47 


briii<^  it  into  opcMMtioii  as  a  dctcnniiiant  of  wages; 
and  the  cliscartlctl  [)h\->ical  niininuini  could  be  rele- 
jgated  to  the  backi^round  as  a  theoretical  niiniinuin. 
The  intention  of  the  caj)italisl  laid  down  a  practical 
and  a  necessar\-  niaxinuini  l)e\-ond  which  wai;"es 
could  not  rise.  The  Wages-Fund  Theory  which 
was  thus  established  is  the  second  scientihc  theory; 
because  it  reC(\L;"ni/.es  that  a  law  of  wages  nurst  be 
more  than  the  pious  opinion  of  an  economist. 

The  Wages-Fund  Theory  is  a  theory  of  supply 
and  demand,  and  naturally  tliscusses  the  supph-  of 
labor,  and  the  demand  for  labor,  and  the  force 
which  brings  alxnit  ;m  ecpiilibrium  between,  or  equa- 
tion of  su[)pl\'  and  demand.  The  theor}-  ma\'  be 
coiu'eniently  formulated  in  three  propositions  deal- 
ing with  these  three  subjects. 

The  first  proposition  dealing  with  the  supply  of 
lal)or  may  be  thus  stated:  There  is  a  determinate 
number  of  laborers,  at  an\'  gi\'en  time,  who  must 
work  inde[)endently  (.)f  the  rate  of  wages,  /.  r. , 
whether  the  rate  l)e  high  or  low.  Taken  withcnit 
the  limitati(3ns  generalU'  stated  1)\-  the  Theorists, 
there  is  a  \-er\'  large  measui'e  of  truth  in  this  pro[)u- 
silion.  The  com[)ulsion  of  necessity  dri\-es  men  to 
labor.  "  ?\Ian\'  workmen  could  I'lot  subsist  a  weeic, 
few  could  subsist  a  nionth,  and  scaixe  any  a  \-ear, 
without  employment  ■■■;  "  and  the  same  necessitx' 
lies  u[)on  autoncMiious  laburei's  as  upon  hired  hibor- 
ers,  althougii  the  degree  of  compulsion  to  imme- 
diate work  ma\'  not  be  so  great.      The  Wages-h'und 

*   Wealth  of  X.iticns,  p.  2S. 


48  The  Bargain  Theory  of  Wages. 


Theory,  however,  quahfies  the  importance  of  this 
proposition  by  expressly  exckiding  from  considera- 
tion all  but  those  who  work  for  hire.  The  determi- 
nate number  of  those  who  must  work  includes  those 
only  who  work  for  hire.  Autonomous  producers 
and  those  who  render  immediate  serv'ices  are  not  in- 
cluded in  the  number.  Adam  Smith  had  expressly 
excluded  the  latter  class,  and  Ricardo  followed  his 
example,  probably  without  reflecting  on  the  extent 
of  the  class  excluded.  The  Wages-Fund  Theorists, 
in  spite  of  their  probably  wider  historical  knowledge, 
followed  Ricardo.  The  essence  of  the  argument 
they  based  on  this  proposition  is  that,  since  the 
number  of  laborers  obviously  cannot  be  immediately 
increased,  and,  owing  to  the  compulsion  which  lies 
on  all  laborers  to  work  to  H\'e,  is  not  subject  to 
diminution,  the  supply  of  labor  may,  therefore,  at 
anv  gi\'en  time,  be  taken  as  fixed.  But  the  boun- 
daries between  those  classes  cannot  be  regarded  as 
permanently  fixed.  Under  normal  conditions,  when 
demand  and  supply  are  adjusted  to  each  other  in 
each  of  the  three  classes,  there  may  be  little  irregu- 
lar transfer;  but  when  industry  fluctuat(.,'s,  the  trans- 
fer from  the  one  class  to  the  other  may  be  great. 
There  is  no  inherent  difficulty  iii  the  way  of  this 
transfer  as  there  is  in  the  case  of  the  mobility  of 
labor  between  trades.  A  man  may  still  work  at  his 
trade  whether  he  works  at  the  bidding  of  another  or 
on  his  own  account.  A  shoemaker  is  still  a  shoe- 
maker whether  lie  works  in  his  own  stall  or  in  an 
employer's  workshop.      Peasant  proprietors  are  not 


Is  the  Supply  of  Labor  Dctcrtiii)tatc  ?  49 

the  only  autoiioiiious  producci's.  There  are  slill 
Iari;'e  nuinl)ei's  of  johlhuL;'  arlisans,  especial!}-  in  the 
smaller  towns;  and  nian\'  ot  these  are  ftjund  now 
workini;'  for  tluMUseU  es,  and  now  at  the  biddini^^  of 
another."'  W  hen  w.iL;es  ai"e  hi;4h  the}'  nui}'  enter 
the  class  of  hired  laboi-ei^s;  when  wa_L;es  are  low, 
the}-  nia}'  ^\■(>l"k  for  their  own  ])eh()(if ;  oi',  I'lcc  versa, 
accordin;.;'  to  ihe  elis[)(  i--it  ion  and  lt_'ni[)ei',uiient  of  the 
indi\idual.  The  class  of  laborers,  nioreox'er,  who 
render  inmiediale  ser\-ices,  is  not,  in  tin:  pi'esent  day, 
absolutel}'  tlistinct  from  the  class  of  hin-d  lal)orers. 
In  Adam  Smith's  ila\-  the  fendal  spirit  was  not  quite 
extinct;  and  e\'er}'  nobK;man  had  a  lar;^"e  number  of 
retainers  to  sup[:)()rt  his  dis^nit}'.  These  retainers 
were,  in  ex'ei'y  sense,  unproducti\'e,  and  could  not 
on  c>ccasion  seek  empl;)}-ment  as  hii'ed  laborers. 
Serx'ants,  howex'cr.  in  the  ])resent  da}'  are  i^enerally 
enL;aL;"ed  fur  economic  purposes;  and  man}'  of  them 
are  ([uite  capable  of  funliiv^' emplo}-ment  as  hired  la- 
borers. ln>teadot  em[)lo}a'nL;' a  i^ardener  e)r  a  coach- 
man !)}•  the  }"e.n'.  one  ma}'  hii'e  him  In'  the  tla}'  or 
the  Week;  and  \\\:'  s^ardener  nia}'  emplo}'  the  rest  of 
his  time  workin;_;'  tor  hire  in  a  nau'ser}'.  or  market 
L;",u'den,  or  on  his  (n\ii  behoof;  anil  the  _L^;artle-!'ier  is 
the  t\'pe  of  a  com]:)aiMti\el\-  lai'u,'e  cla>s.  'Ihe  wa^es 
of  di  iniL'st  ic  serxants  ha\"e  ri>en,  in  conserpience  of 
the  atti'action  of  female  l;d)or  to  the  factories;   while 


*  The  ilc^'c!' ''iiiuMit  iif  iii'iiwl  r\-  I  m  ;i  !.i:j,L-  ^l\'.!c  ha-  hi-c'i  acconi- 
paiiic'l  1)}'  a;i  incrc.oinL;  transfer  'if  li:  >' -rcr-  \\  in  the  aul^ -ih  iiimus  to 
the  liired  ell--:  hut  th;^  iir '\  cineiii  h.i-  lieeM  ^o  rcL^'uLir  and  ^50  long 
CMiitinuel  tliat  it  niav  he  cwn.-i'iere'i  nomi.il. 


50  The  Bargain  Theory  of  Wages. 


depression  of  trade  drives  many  from  the  industrial 
to  the  service  class  at  least  for  the  time  being.  The 
prolonged  business  depression  in  the  United  States 
following  the  panic  of  1893  has  diverted  a  large  por- 
tion of  the  new  supplies  of  labor  from,  business  to 
the  professions;  and  in  one  profession  at  least — uni- 
versity teachers — salaries  are  falling  in  consequence. 
The  prospect  of  certainty  has,  for  the  time  being, 
more  than  offset  the  attractions  of  the  chances  of 
success. 

Thus,  though  it  were  true  that  the  number  of 
those  who  must  work  is  determinate,  it  does  not 
follow  that  the  number  of  those  who  must  work  for 
hire  is  determinate,  l^ut  the  number  of  those  who 
seem  committed  to  labor  is  not  altogether  determi- 
nate. There  seems  to  be  a  margin  of  labor  (not 
necessarily  a  large  margin)  which  works  or  not  ac- 
cording to  the  inducement.  We  do  not  refer  to 
the  out-of-work  members  of  a  trade-union,  for  the 
Theorist  will  rightly  point  out  that  the  number  of 
laborers  is  only  nominally  smaller,  if  those  who  work 
support  those  who  do  not  work.  But  if,  and  in  so 
far  as,  those  who  are  out  of  work  are  supported,  not 
by  the  trade-union  funds  but  by  public  or  private 
charity,  the  burden  of  their  support  is  borne  by  the 
community  at  large,  and  probably  mainly  by  those 
members  of  the  community  who  are  not  included 
within  the  class  of  hired  laborers.  The  numbers  of 
men  in  receipt  of  poor  relief  var\'  considerably;  and 
these  fluctuations  show  that  the  first  proposition  of 
the  Wages-Fund  Theory  requires  some  qualification. 


TJie  Supply  of  Labor. 


51 


The  Theory,  ho\vc\-cr,  claims  to  be  primarily  a 
theory  of  the  demand  for  labor.  "  The  causes  i;ov- 
ernini^  the  supply  of  labor  may  Ije  taken  as  suffi- 
cientl)-  elucidated.  Our  business  is  with  the  causes 
go\'ernini^r  demand — _t;o\-erning  the  amount  of  wealth 
applied  to  the  direct  purchase  of  labor,  or,  as  we 
may  equally  well  exi)ress  it,  <^overnini(  the  W'ai^es- 
l'\ind.'"  ■'•  The  causes  ^^JverninLj  the  supply  of  labor 
are  set  forth  in  the  doctrine  of  population  and,  on 
the  whole,  we  are  asked  to  consider  the  supply  of 
labor  which  must  work  as  given  independently  of 
the  demand. 

The  supply  of  labor  is  rei^arded  as  determinate, 
because  laborers  must  work  and  cannot  stand  out  for 
their  price;  l)ut  it  does  not  necessarily  follow  that, 
because  all  laborers  must  work  to  live,  their  objec- 
ti'Mi  to  w(^rk  f(M'  li:>wcr  waj^es  than  they  ha\-e  been 
accustomed  to,  can  ha\-e  wo  effect  on  the  price  of 
labor.  This  inference,  howe\'er,  is  drawn  b\'  all  the 
exponents  of  the  theoi-y.  Mill,  indeed,  elites  recoi;- 
ni/.e  briell)-.  in  passing",  in  his  chapter  on  profits,  that 
the  adwmce  of  wa!j,'es  is  re;j;ulatetl  l.)\'  the  proilucti\x 
p(nver  of  labor.  The  moti\'e  wliicli  the  capitalist 
has  in  ad\'ancin_i(  washes  is  not  philanthropic  but 
economic;  and  his  advances  are  _Ljo\-erned  by  the 
antici])ated  surplus  of  the  })roduct  o\-er  the  ad\'ances 
lie  must  make  to  labor.  rrofit.  therefore,  depends 
on  the  producti\'eness  of  labor:  and  the  laborer  is 
therefore  not  a  merely  passi\'e  factor  in  the  waL^es- 
bargain.      The   laborer  mn>t  worl-:,  but  it  is  the  eni- 

*  C'airiiCb,  LtdJni^'  PriiuipL-s,  p.  iGi. 


52  T]ic  Bargain  Theory  of  Wages. 


plover's  interest  that  he  should  work.  Therefore 
the  objection  to  a  large  number  of  laborers  to  sub- 
mit to  a  reduction  of  wages  has  an  undoubted  in- 
fluence on  the  employer's  intentions.  To  reduce 
wages  in  spite  of  the  objections  of  the  laborers  is 
indeed  always  possible  ;  but  it  is  not  always  profit- 
able;  and  an  emplo\'er  may,  owing  to  these  objec- 
tions, ccMitinue  to  pay  higher  wages  than  he  might 
otherwise  succeed  in  forcing  his  employees  to  accept. 
The  reason  is  that,  as  Mill  himself  has  pointed  out, 
the  mental  and  moral  qualities  of  the  laborer  affect 
the  productiveness  of  his  labor;  and  hope  and  con- 
tentment are  two  of  the  most  important  of  these 
qualities.  "  The  wages  of  labor  are  the  encourage- 
ment of  industry,  which  like  every  other  human 
quality  improves  in  proportion  to  the  encourage- 
ment it  receives.  .  .  .  When  wages  are  high, 
accordingl}-,  we  shall  alwa}-s  find  the  ^vorkmen  more 
acti\'c,  diligent,  and  expeditious  than  when  they  are 
low. "'  -^  To  ignore  his  objections  may  make  a  work- 
man discontented,  and  a  discontented  workman  is 
seldom  as  efficient  as  he  might  be.  But  the  fact  of 
the  ultimate  regulation  of  wages  b}'  the  surplus 
which  the  employer  hopes  to  realize  was  not  con- 
sistent!}' recognized  cither  b}-  Mill  or  b\'  an\-  other 
Theorist.  The  Wages- I'und  Tiierirx-  is,  therefore, 
entirely  a  theor\-  of  the  demand  for  labor — the  sup- 
]j1\-  being  regarded  as  fixed  and  tlu;  laborer  merely 
as  tile  I'ecipient  of  wages. 

*   U'l-alt'i   of  .Vathvr,    y.    34.      Fur  a    further   discussion    of    this 
que.^ti'iii  -ee  tlie  cha;;ter  on  Trade-L'nionism. 


Capital  and  Wages. 


53 


The  first  proposiliDH  has  not  been  serioush',  or 
iiitelhi^ently,  called  in  ([uestion,  but  the  second  has 
provoked  eiulless  discussion  and  criticism.  It  em- 
bodies the  centred  doctrine  of  the  Theor\-,  and  may 
be  stated  thus:  In  any  country,  at  any  L;"i\'en  time, 
there  is  a  determinate  amount  of  capital  uncon- 
ditionally destined  to  the  p.u'ment  of  labor;  and 
thi>  is  called,  for  shortness,  the  \\'aL;es  h\ind. 

The  basis  of  this  ])ro[)osilion  is  the  assum])tion 
made  by  Adam  Smith,  and  adopted,  uiKpiestioUL-d, 
from  him  b\'  all  eC(~)nomists  f'jr  a  hundred  \-ears,  that 
\va<4'es  are  paid  out  of  ca[)ital.  This  is,  perha})s,  not 
the  best  \va\'  of  ex})ressin_i4'  the  important  phentjme- 
non  to  Vv'hich  attention  is  called,  that  the  hired 
laborer  recei\'es  not  an  immediate  but  a  deri\'ati\'e 
share  of  the  product  of  industry.  Adam  Smith 
e\-identl\-  did  not  thiid<:  that  the  assumiption  recpu'red 
either  explanation  or  justification;  and.  althoui^h 
both  he  and  the  chief  of  his  success()rs  pointed  out 
the  reason,  in  the  oi-'_;aniz;ition  of  industr\',  why  this 
should  be  so,  they  ilid  not  de\'e]op  the  reason  so  far 
as  to  show  concIusi\el\'  the  necessit}'  of  the  assump- 
tion. The  process  of  production  is  spread  over  a 
lon;^'  period  of  time  and  the  main  function  of  capital 
is  to  permit  this  extendetl  process.  We  neetl  not 
attempt  to  determine  \\-liether  <a'  not  it  is  a  law,  or 
mere!}'  ;in  ol)ser\"ed  fact  of  modern  iridustr}-,  that 
the  pi'o'^Tess  of  indu~^ti'\'  -should  mean  the  ex])ansion 
of  the  periiul  Ijetweeii  the  time  when  the  fii'st  steps 
of  ])roduction  are  taken  and  the  tiiiK:  when  the  com- 
modity   is    tniall}'    in    the    hands    of    the    consumer. 


54  TJie  Bar  gam  Theory  of  Wages. 


Ever  since  economists  combined  to  reject  the  physio- 
cratic  distinction  between  productive  and  unproduc- 
tive labor,  more  or  less  adequate  recognition  has 
been  given,  in  theory,  to  the  fact  of  long-period 
production.  It  does  not  require  now  even  an  effort 
of  the  economic  imagination  to  realize  how  little 
of  the  labor  of  to-day  has  been  engaged  in  produc- 
ing what  will  be  ready  for  use  to-morrow.  A  com- 
modity is  not  finally  completed  until  the  retailer 
has  put  into  it  the  utility  of  being  where  it  is 
wanted,  and  it  is  in  the  hands  of  the  consumer. 
Only  a  comparatively  small  number  of  laborers  are 
employed  in  giving  the  final  touches  to  a  com- 
modit}-,  and  usually  the  completed  product  of  one 
industry  is  the  raw  material  of  another.  Whether 
it  takes  one  year  or  five  years  or  ten  years  to  bring 
a  commodity  from  its  earliest  stages  to  the  hands  of 
the  consumer  is  not  a  matter  of  much  moment:  the 
essential  point  is  that,  in  every  case,  it  does  take  a 
long  time.  The  length  of  the  period  is,  in  part, 
concealed  from  us  by  the  fact  that  under  no  circum- 
stances is  a  commodit}'  brought  thus  far  by  one 
worker  or  group  of  workers  alone.  Each  worker, 
or  group  of  workers,  disposes  of  the  product  to  the 
workers  of  the  next  stage;  and  so  far  as  they  are 
concerned,  the  process  of  production  is  complete. 
I^ut  the  final  product  is  the  product  of  successive 
stages  ;  although,  for  the  sake  of  bre\'ity  ( ignoring  the 
subsequent  services  of  the  transporter,  the  merchant, 
and  the  retailer),  we  gencralK'  speak  of  the  last  pro- 
ducer in  the  series  as  the  maker  of  the  commodities. 


Real  Washes  (Vid  tltc  Xalioiial  D'rvidciid.         55 

The  importaiK:c  of  this  fact  of  the  theory  of  wac^^es 
is  that,  at  any  time,  oiih-  a  small  proportion  of  the 
agents  of  industry  can  be  en_i;"a<;ed  in  turniiiL^r  out 
commodities  which  are  immediately  consumable. 
Since  real  \vaL;"es  consists  of  commodities  read\-  for 
immediate  consumption,  waives  must  be  paid  out  (jf 
the  stock  of  consumable  commodities  and  paid  by 
those  who  own  the  stock.  The  i^reat  majorit\-  of 
wa<^e-earncrs,  then,  cannot  be  paitl  cnit  of  the  im- 
mediate product  of  their  own  labor  because  the  <^oods 
they  are  enL,^aged  in  advancini^  one  stage  towards 
completion  are  not  in  a  condition  to  satisfy  imme- 
diately an}'  human  want  whatsoever.  The  real 
wages  they  receive  must  come  out  of  the  stock  of 
completed  commodities  ^\•hich  has  been  called  the 
national  dividend.  There  is  no  other  source  from 
which  wages  can  be  paid. 

Whether  wages  are  paid  out  of  capital  is  the  ques- 
tion whether  goods  ready  for  the  consumer  are  or 
are  not  capital.  Ricardo  had  defined  capital  in  such 
a  wa\-  as  i)racticalh-  t(^  limit  it  to  the  food  necessai'\-  to 
give  effect  to  labor;  and,  with  or  with<^ut  a  conscious 
ellipsis,  his  definition  was  adopted  h\  most  econo- 
mists. h\)od  is  the  t\'[iical  consumption  commodity, 
and  wages  are  therefore  paid  out  of  capital.  The 
almost  exclusi\-e  attention  of  economi-ts  down  to 
the  time  of  Mill  to  the  problems  of  pi'oiluction  had 
made  it  possil)Ie  for  tlu;m  to  regard  wages  simjilx- 
as  a  means  to  further  pi'oduction.  Mill  did  declare 
that  all  wealth  is  consumed;  but  tin:  emphasis  he 
l.iid  o\\  this  proposition  did  not  enable  him  always 


56  T]ic  Bargain  Theory  of  Wages. 


and  consistently  to  rccof^nizc  that  consumption  is 
an  end  in  itself.  Wattes,  /.  e.,  real  wages,  are  not 
paid  for  the  purpose  of  enabling  production  to  be 
carried  on  ;  and  the  laborer  never  regards  his  wages 
in  the  light  of  an  investment.  Wages  are  an  end; 
and  it  is  of  no  consec^uence  immediately  to  the 
\vage-earner  that  they  are  also  a  starting-point  in  a 
new  economic  c\'cle.  It  does  not  seem  desirable, 
therefore,  to  include  food  and  other  consumable 
commodities  within  the  content  of  the  term  capital. 
Capital  is  more  appropriately  confined  to  what  Pro- 
fessor Taussig  has  called  "  inchoate  "  wealth  or 
goods  on  the  way  towards  com})letion  for  the  satis- 
faction of  human  wants.  Wages,  and  all  the  other 
distributed  sliares,  are  paid  out  of  the  income  rather 
than  out  of  the  ca[)ital  of  the  community;  althcnigh 
it  is  to  be  kept  in  n^ind  that  the  iiicome  oi  the  com- 
munity consists  in  that  portion  of  the  inchoate 
v.'ealth  which  lias  just  been  ad\'anccd  tf)  tlie  final 
stage.  The  wages  of  present  labor  will  not,  in  gen- 
eral, be  ])aid  out  of  the  })roduct  of  j)resent  labor. 
The  reward  of  labor  is  paid  out  of  the  prrjduct  of 
past  labor;  and  the  labor  exijended  to-day  may  ser\'e 
to  remunerate  labor  a  \'ear  or  five  years  hence.  The 
present  reward  of  present  labor  consists  of  consump- 
tion goods  which  ha\'e  been  preparing  for  use  during 
man}'  }'ears. 

Th.e  source  of  wages  is  the  stock  or  the  fund  of 
such  consumi)tion  gorxls;  and  those  ^\ho  are  in 
possession  of  this  stock  are  the  real  dispensers  of 
wages.     The  laborer  is  certainly  not  the  owner;  and 


TJic  Oivncrs/iip  of  t lie  ITaj^cs  FiDid. 


57 


his  employer  seldom  is.  The  present  necessities  of 
the  l.ihorer  com[)el  him  to  exchani^e  the  \-;ilue  of 
his  sh.ire  in  ;i  curtain  amonnt  of  capital  or  inchoate 
wealth  for  commodities  which  will  satisfy  his  imme- 
diate wants.  If  his  necessities  would  allow  him  to 
wait  until  the  wealth  hu  has  helped  to  create  matures 
into,  or  is  cari'icd  out  into,  commodities  in  a  condi- 
tion to  satisfy  human  wants,  he  mi_L;ht  be  able  to 
exchange  his  share  in  the  product  for  a  larger 
amount  of  commodities  that  will  satisfy  his  indi- 
vidual wants.  Ihit  the)'  will  not  allow  him  to  wait. 
So  he  discounts  the  \'alue  of  his  [)resent  contribution 
to  the  income  of  tlve  or  ten  years  hunce  and  recci\'es 
in  return  actua.lly  consumable  commodities  which  it 
may  l)e  '[\\c  or  ten  years  since  he  had  helped  to  ad- 
\'ance  one  staL;e  towards  con-aimption. 

The  empli)\'L-r,  when  he  disposes  of  the  out]nit  of 
his  factor}-,  is  in  ])i'actica]ly  the  same  position:  he, 
too,  di^cou.nts  the  \'alue  of  his  C(  )nti'il)ution  to  future 
inconie  aiul  he  diH's  so  under  the  pressui'e  of  the 
same  necessitx'  of  realizing;'  now  Kn\  what  would  ac- 
crue to  him  in  the  future.  I  lis  necessit\'  is  not  so 
immediate;  nor  does  he  alwa\-s  feel  compelled  to 
make  a  barL;ain  for  the  output  with  someone,  before 
he  bcL^ins  to  pi-oduce.  The  laboi'er  not  oid\-  sells 
his  share  of  the  ultimate  protluct  at  one  staL;"e  earlier 
than  the  empli)\-er  sells  his.  biit  he  is  not  in  a  p()>i- 
tion  to  take  any  risl^s.  lie  cannot  e\'en  wait,  so 
L^reat  and  so  immediat'j  are  Ins  necessities,  until  he 
has  mrult-  his  contribution  before  he  disposes  of  its 
result.      The  emplo}-er,  as  a  rule,  can  wait  and  tlu; 


$8  TJic  Bargahi  Theory  of  Wages. 


buyer  of  the  output  of  the  employer's  industry  takes 
less  risk  and  can  afford  to  give  better  terms.  The 
employer  from  this  point  of  view  is  simply  a  middle- 
man or,  if  you  like,  a  broker  or  private  banker  who 
discounts  values  which  are  too  uncertain  for  .the 
regular  banker  to  touch.  He  takes  the  extra  risk 
of  the  laborer's  contribution  not  being  what  it  is  ex- 
pected to  be,  and  consequently  he  must  charge  a 
proportionately  higher  rate  of  discount.  Owing  to 
the  lengthened  process  of  production  the  laborer  in 
order  to  live  is  compelled  to  have  recourse  to  his 
broker;  and  when  the  laborer  is  not  economically 
subject  to  the  employer  he  is,  under  his  actual  con- 
ditions, the  gainer  by  the  transaction.  He  is  not 
in  a  position  to  take  risks,  and  therefore  gains  by 
obtaining  a  sum  down  instead  of  the  somewhat 
doubtful  value  which  he  might  obtain  after  waiting. 
Theoretically,  the  laborer,  who  is  not  paid  till  the 
end  of  the  season  or  till  the  product  is  marketed, 
ought  to  be  in  a  better  position  than  the  man  who 
is  compelled  to  make  his  emplo}'cr  take  the  risks; 
but  practically  he  is  not;  for,  in  such  cases,  the  la- 
borer, being,  as  a  rule,  economically  subject  to  his 
employer,  is  compelled,  like  a  man  in  his  necessities 
having  recourse  to  a  usurer,  to  accept  whatever  terms 
the  employer  may  make. 

Whether  wages  are  paid  out  of  capital  or  not  is 
largely  a  question  of  the  definition  of  capital;  and, 
in  the  sense  in  which  \\-c  ha\"e  taken  that  term, 
they  are  not  paid  out  of  capital.  On  the  contrary, 
if  a  paradoxical  use  of  language  may  be  permitted 


Capital  (Did  Wages. 


59 


for  a  moment,  the  laborer,  instead  of  being  sup- 
ported out  of  ca[)ital,  parts  with  capital  (^"  inchoate 
wealth  "j.  actual  or  to  be  created,  in  order  to  obtain 
an  income  of  commodities  in  a  form  ready  to  satisfy 
human  wants.  llis  wages  are  paid  out  of  the  in- 
come of  society.  'I'his  fact  is  concealed  from  us  by 
the  inter\-ention  of  mone\'  [).i\'ments.  The  laborer 
recei\'es  a  money  wage  direct  1\'  at  the  hand  of  his 
emplo\-er  antl,  altlunigh  the  distinction  between 
money  wages  and  real  wages  is  alwa\"s  made,  it  is 
not  always  adhered  to.  Because  the  laborer  re- 
cei\'es  his  money  wages  from  his  immediate  em- 
ployer, it  is  generally  taken  for  granted  that  he  is 
paid  out  (jf  the  funds  of  his  employer;  and  if  we 
confine  our  attention  to  mone\'  wages — a  matter 
of  little  importance  for  the  theor}-  of  wages — the 
fact  is  as  represented,  h'rom  an  indi\idual  [)oint  of 
view,  the  payment  made  by  an  emplo\'er  to  his  em- 
pl;)\'ees  is  a  final  transaction,  but,  from  a  social 
point  of  \'iew',  it  is  onh-  a  step  towards  the  final 
transaction.  In  the  payment  of  real  Awages  the  em- 
ployer ma\'  Ijc  only  an  intermedial')-  cm"  agent :  the 
real  pa\'er  of  wages  is  the  owner  of  the  stock  of 
consumption  gixxls. 

The  proposition  that  wages  are  paid  out  of  capi- 
tal is,  perhaps,  not  the  best  wa\-  of  expressing  the 
tlependence  of  the  lab()rer  on  his  empli>\-cr:  and,  in 
conse<[uence  of  the  i'ladctjuate  expressi')n,  in  the 
Wages- I-'und  Theor\-  this  dep^'iulence  is  somewhat 
exaggerati'd.  Mill,  wIim  h.is  gi\-c!i  us  the  standard 
exposition  of  the  theor\-,  defines  capital  by  reference 


6o  TJie  Bargain  TJicory  of  Wages. 


to  the  intentions  of  the  owner  of  capital;  and  this 
definition,  combined  with  the  natural  habit  of  re- 
garding the  payment  of  money  wages  as  a  final 
transaction,  leads  to  the  characteristic  and  central 
doctrine  of  the  Wages-Fund  Theory,  that  the  money 
resources  which  the  employer  has  set  aside  for  the 
payment  of  wages  is  a  determinate  amount.  With 
the  version  of  the  theory  that  finds  in  it  only  a  state- 
ment of  the  wages  problem  we  need  not  trouble. 
We  can  find  our  own  statement  of  the  problem. 
The  Wages-Fund  Theory  stands  or  falls  according 
to  the  answer  to  the  question  whether  the  wages 
fund  is  predcterminate  and  fixed.  That  the  fund  is 
determinate  ex  post  facto  needs  no  long  demonstra- 
tion :  so  the  popular  and  unmodified  x'crsion  of  the 
theory  is  the  only  version  we  need  consider. 

According  to  this  version,  an  emplo}"er,  looking 
to  the  resources  at  his  command  and  to  the  nature 
of  the  productive  process  in  v.'hich  he  is  engaged, 
makes  up  his  mind  that  so  much  and  no  more  it  will 
be  profitable  for  him  to  spend  in  hiring  labor — in 
much  the  same  way  as  a  householder,  looking  to 
the  size  of  his  income  and  the  domestic  necessities 
of  liis  household,  decides  whether  to  engage  one 
or  two  or  three  domestic  scr\-ants.  Whatever  the 
hesitation  when  the  critical  question  is  propounded, 
there  can  be  no  doubt  that  it  was  generally  assumed 
that  not  only  no  more  but  no  less  than  this  prede- 
termined amount  v.-f)n.ld  ox  could  be  spent  in  hiring 
labor.  This  definite  amoun.t  \\"as  earmarked  for  a 
definite  purpose;  and — an   important   fe^iture   often 


Is  the  Wai^is  Fund  l''rcdctcrjiii)icd ?  6i 


ovcrlookctl  by  tlic  critics  of  tlic  'I'heory — since  tlic 
rci;ul;itii)n  of  iiuhistry  was  in  tlic  liands  of  the  capi- 
talist, no  chan;,;"c  could  ^ccur  which  mi;4ht  induce 
him  to  alter  his  intention.  Under  changed  conditions 
his  intentions  would  be  different;  but,  in  the  normal 
course  of  iiidustrx',  his  intentions  determined,  and 
were  not  dcti.-rmined  by,  the  condition  of  industrx'. 
It  was  an  eas)'  matter  for  critics  who  accepted  th.e 
intli\-idual  limited  standpoint  of  the  \\'aL,^es-]'^ind 
Theory  and  treated  onh'  mone\'  wa^'cs,  to  denu)n- 
strate.  as  soon  as  susi)ici(Mi  of  the  \'alidit\'  of  tlie 
Theory  had  been  aroused,  that  the  wa^es  fund  was 
neither  pi-edete'i'ndnt'd  nor  fixed,  that  employers  did 
not  j)a\-  waL^es  fi-oin  a  ro}-al  desire  to  carry  out  their 
intentions,  but  fr(Mn  the  more  sordid  desire  of  se- 
curing;" for  tliemseh'cs  the  surplus  of  the  product 
o\-er  the  adx'ances  made,  that  althou;j;h  \va;j,'es  mi^ht 
be  adx'anced  tL-mporaril\'  1)\'  the  employer,  the  ad- 
\  ances  w\-re  mca-'Ured  by  the  anticipated  price  to  be 
realized  for  the  i>rod.uct.  and,  finall}-,  that  the  im- 
])ortant  fact(Tr  to  \ic  con-itleri.'d  was  not  the  intention 
of  the  ca[)italist,  but  the  efficienc}-  of  the  labijrer. 
On  all  of  these'  ])oints  the  critics  of  the  Theor\-  had 
an  ea-^\'  but  a  l)ari-eii  \ietor\-.  Tlu'\-  had  an  easy 
victor\-,  because  t]ie\-  could  show  tliat  the  capitalist 
ne\-er  acted  a-;  he  did  out  nf  slu-er  indillei'ence.  or  to 
exhibit  his  stri.MVj;th,  but  fr  lUi  an  ecuncniic  moii\-e. 
'I"lic\'  had  a  barren  xic'tirw  because  th;\'  ciudmed 
their  atteutiwn  mainK'  t"  ni'Miex'  wML;e-  a^  ni-  diud_)t 
tlu'\-  felt  justified  in  (li>iu;e;,  in  crit  ici--^iii;_^  a  theory 
which  C(  infilled  il-elt',  in  the  main,  to  mone\-  wasjes. 


62  The  Bargain  Theory  of  Wages. 


The  criticism  was  perfect,  but  its  results  were  purely 
negative.  It  is  easy  to  show  that  the  money  which 
an  employer  is  prepared  to  spend  in  wages  is  neither 
fixed  nor  predetermined.  Theorists  neglected  alto- 
gether, as  Mr.  McLeod,  among  others,  has  pointed 
out,  the  influence  of  credit  in  swelling  the  resources 
of  the  employer;  and  when  this  influence  is  taken 
into  account  the  Wages  Fund  cannot  be  regarded 
as  fixed.  It  is  not  predetermined  because  industry 
is  not  stationary,  and  not  governed  exclusively  by 
the  intentions  of  the  employers.  Industry  is  con- 
stantly fluctuating  and  since  the  employer  never 
acts  qua  employer  without  an  adequate  economic 
motive  the  intentions  of  the  employer  will  change 
with  every  change  in  the  prospects  of  industry. 

But  all  this  valid  criticism  is  beside  the  question, 
which  is  one  of  real  wages.  The  source  from  which 
wages  must  be  paid  is  the  stock  of  consumable 
commodities,  which  is  indeed  continuously  being 
exhausted  as  the  commodities  are  used  for  the 
satisfaction  of  human  wants,  but  also  continually 
replenished  from  the  \'olumc  of  commodities  near- 
ing  completion.  This  stock  is,  rione  the  less,  for  any 
given  period  a  fairly  definite  amount.  Production 
is  spread  over  a  long  period,  and  no  demand,  how- 
ever urgent,  can  indefinitely  increase  the  amount  of 
all  commodities.  The  process  of  production  ma}', 
under  pressure  of  increased  demand  and  higher 
prices,  be  somewhat  shortened;  and  since  main-  of 
the  agents  and  much  of  the  material  of  production 
can  be  used  in  more  directions  than  one,  particular 


TJic  True  \\'(7jj^i\s  Fund  Fixed. 


63 


kinds  of  conmioclitics  may  be  produced  in  vastly  in- 
creased amounts;  )-et  the  total  effect  on  the  real  in- 
come of  societ}',  /.  c\,  on  the  stock  of  consumption 
<4()ods.  is  not  \'ery  L;'reat.  The  income  of  societ}', 
at  an\'  i;"i\en  moment,  ma\'  he  taken  as  an  approxi- 
mately fixed  amount;  and,  inter[)reted  in  this  sense, 
the  \\'a_L;'es  h'und  may  be  rei^arded  as  a  proportion 
of  a  fixed  amount.  It  is  true  that  on  this  account 
the  position  of  the  \\aL;e-earners  is  no  worse  than 
the  position  of  the  recei\'ers  of  rent  and  interest. 
These,  too,  are  paid  out  of  a  fixed  amount. 

The  orii^'inal  W'aijes-Fund  Theory  asserted  that 
the  amount  of  wealth  which  i;"oes  to  labor  is  deter- 
mined by  the  employer ;  and  e\"en  in  the  modified 
interpretation  of  the  Waives  h\ind  the  statement 
remains  substantially  true,  if  we  extend  the  applica- 
tion of  the  term  capitalist  emplo\'er.  The  stock  of 
consumable  commodities  beloni^'s  absolutely  to  its 
owners,  whoever  they  may  be.  All  claims  on  it  by 
those  enL;a!j;ed  in  its  production  have  been  br<ni!4ht 
out.  The  labi^rer  has  Ioul;'  since  bartered  his  share  of 
the  final  and  completed  product  for  neces-aries  of  life, 
it  ma\-  be,  l)efore  the  prc^cess  of  pr(^duction  was  near- 
ini,^  completion.  The  empl(\\-er  has  sold  out  his 
ri;4"hts  that  he  mii^ht  meet  his  oblii^'ations  and  con- 
tinue his  business;  and  the  product  belonL,''s  finall\- 
and  completely  to  its  owner.  The  class  of  owners 
need  not  necessarily  be,  as  it  is  under  modern  in- 
dustrial conditicMis,  limited  in  number;  but  whether 
the  class  be  lar!_^e  or  small,  the  C()mpleted  product 
bel()n<rs   to  it   to   do  what   it   likes  with   its  own,  to 


64  TJic  Bargain  Theory  of  Wages. 


consume  it,  to  hoard  it,  or  to  waste  it.  If,  however, 
any  member  of  the  class  choose  to  postpone  the 
use  of  part  of  the  share  of  this  income  of  consumable 
commodities  which  has,  in  the  economic  course,  been 
assigned  to  him,  he  leaves  so  much  more  of-  the 
stock  for  other  owners  or  non-owners  to  use.  The 
end  of  the  process  has  been  reached,  and  consuma- 
ble goods  must  be  consumed  or  wasted.  If  he  does 
not  consume  these  commodities  himself,  he  leaves 
them  for  some  other  to  consume;  and  if,  from  any 
cause,  he  prefers  to  postpone  his  consumption,  there 
are  others  ready  and  willing  to  step  into  his  place. 
Xo  man,  howe\"er,  if  ^\■e  omit  the  case  of  charity,  is 
willing  to  postpone  immediate  satisfaction,  except 
in  return  for  a  proportionally  greater  satisfaction  in 
the  future;  and  the  only  v\a\-  in  which  a  man  can 
postpone  his  immediate  satisfaction,  and  secure  a 
greater  amount  of  satisfaction  in  the  future,  is  by 
exchanging  a  certain  amount  of  completed  wealth 
or  income  for  an  amount  of  inchoate  wealth  or  capi- 
tal which,  when  carried  '10  completion,  will  repay 
him  for  the  sacrifice  invoh'cd  in  the  i)ostponement 
of  present  satisfaction.  If  he  is  so  minded  he  will 
always,  owing  to  the  conditions  of  production,  find 
many  willing  to  exchange  inchoate,  or  less  than  in- 
choate, wealth  for  present  income  of  consumption 
goods.  Now,  although  in  the  aggregate  the  sa\'ings 
of  the  \\-orking  classes  seem  enormous,  these,  \-et, 
form  a  \-ery  small  fraction  of  the  total  sa\-ings  of 
society,  and.  under  the  present  conditions  of  unequal 
distribution  of  wealth   in  society,  ^\■e  must  look  for 


The  AinouHt  of  tJic  Wages  Fund.  65 


saving  only  from  those  whose  object,  in  common 
parhmce,  is  to  make  money.  The  members  of  the 
employing  class  alone,  taking  this  term  in  a  wide 
sense  to  include  bankers  and  in\'estors,  are  able  and 
willing,  to  any  appreciable  extent,  to  postpone  en- 
joyment and  buy  capital  or  inchoate  wealth  with  in- 
come. The  laborers,  on  the  other  hand,  as  we  saw, 
are  willing,  indeed,  are  forced  by  the  necessities  of 
life,  to  exchange  capital  for  income,  because  other- 
wise they  would  be  unable  to  command  the  com- 
modities which  will  satisfy  their  present  wants.  The 
laborer  has  long  ago  parted  with  his  share  of  present 
income  under  pressure  of  necessity,  and  he  must 
now  purchase  a  share  in  the  present  income  by  part- 
ing with  his  claims  on  a  yet  distatit  product.  Con- 
sc(|uent!y  the  price  which  he  is  likely  to  receive  for 
his  claims  is  the  amount  of  their  consumption  of  the 
actucdly  finished  commodities  which  the  owners  are 
willing  to  postpone.  The  measure  of  the  Wages 
h\ind  is  thus  set  by  the  degree  of  the  willingness  of 
the  owners  of  consumable  commodities  to  postptuie 
their  coiisumption.  This  fact  is  not  clearh'  enunci- 
ated in  the  proposition  of  the  Theory  that  the  inten- 
ti(Mi  of  the  cajiitalist  determines  the  Wages  hTind  ; 
because,  owing  to  the  present  une(|ual  distribution 
of  wealth  and  those  facts  of  life  set  {ox\\\  in  the  law 
of  diminishing  utility,  the  primary  owners  of  the  in- 
come of  society  could  not  possibl\-  consume  the 
whole  of  it.  The  greater  part  (^f  this  income  con- 
sists of  commodities  which  can  satisfy  only  the  ele- 
mentary   plu'sical    wants;     an.d,    since    the    present 


(^  The  Bar  gam  Theory  of  Wages. 


owners  arc  few  in  number,  they  must  postpone  part 
of  their  consumption  and  would  do  so  whether  they 
received  a  "  reward  for  their  abstinence  "  or  not. 
The  sociaHsts  have  poked  rather  laborious  fun  at 
the  author  of  this  famous  phrase  and  have  justly 
pointed  out  that,  in  the  present  distribution  of 
wealth,  the  postponement  of  present  consumption 
is  a  necessity,  not  a  virtue.  The  capitalist,  or,  as 
we  had  better  call  him,  the  final  owner,  is  almost  as 
much  bound  to  buy  future  income  as  the  laborer  is 
to  buy  present  income.  Still,  since  the  laborer  has 
no  primary  share  in  this  present  income,  the  amount 
of  it  which  laborers  can  receive  as  wages  is  strictly 
determined  by  the  amount  of  present  consumption 
that  the  owners,  under  whatever  conditions,  are  will- 
ing to  postpone. 

We  are  now  in  a  position  to  discuss  the  bearing 
of  consumption  on  the  wages  question.  It  is  often 
asserted,  in  defiance  of  Mill  and  the  classical  econo- 
mists, that  a  demand  for  commodities  is  a  demand 
for  labor,  and  a  practical  corollar}'  is  sometimes 
added  that  the  payment  of  high  wages  to  the  \\-ork- 
ing  classes  results  in  the  general  prosperity  of  in- 
dustry. In  the  main  the  answer  of  the  classical 
economists  was  correct;  although  thev  did  not,  per- 
haps, develop  all  that  was  implied  in  their  answer, 
that  a  demand  for  commodities  could  only  change 
the  direction  of  industry,  because  demand  and  sup- 
ply are  but  the  two  sides  of  the  one  shield.  A 
change  of  the  direction  of  industry,  howexxr,  has 
more  than  the  merely  formal  consequences  which 


"A  Dctnand for  Coiinnodities."  Gy 


alone  they  seemed  to  recognize.  i\ii  increased  de- 
mand for  the  comniDclities  consumed  by  the  working 
classes,  in  consecjuence  of  hii^her  waives  being  paid, 
will  change  the  diri'Ction  of  industry  to  more  profit- 
able channels.  A  certain  i)ortion  of  the  increment 
may  be  spent  on  working-class  luxuries  of  food  and 
drink,  but  the  greater  part  will  be  w  isely  expended, 
especially  if  the  rise  in  wages  is  of  some  duration. 
The  result  will  be,  since  the  working  classes  fr)rm 
the  great  majority  of  the  nation,  and  their  wages 
allow  them  to  satisfy  only  the  elementary  and  uni- 
versal wants,  that  productic^n,  owing  to  the  increased 
demand,  \\\\\  be  conducted  on  a  more  economical 
basis.  The  limit  to  the  di\isi(^n  of  labor  is  the  area 
and  extent  of  the  market;  and  where  fashion  and 
caprice  rule,  dix'ision  of  labor  cannot  be  carried  very 
far.  A  working-class  tlemand  is  not  subject  to 
fashi<~)n  and  caprice,  individual  preferences  being 
offset,  owing  to  the  area  ()f  the  market;  and,  conse- 
quenth-,  new  and  more  economical  processes  may  be 
commenced  in  tlie  assurance  of  a  steady  market. 
Therefore,  when  a  change  in  the  demand  arises  from 
higher  wages  paid  to  the  working  classes,  there  may 
be  a  great  gain  to  societ\-  as  a  \\"hole.  I^xcept  in 
this  case,  however,  a  demand  f<^r  commodities  is  not 
a  demand  for  labor.  A  (K.'mand  for  commodities, 
talking  coninv)ditii's  in  tlu;  sense  of  goods  ready  for 
consumption,  im|)lies  a  lai'ge  consumption  of  real 
income  b}'  its  immediate  cnviu'rs  ;  and,  as  we  have 
seen,  the  amount  which  i<  paid  in  wages  dejjends  on 
the  extent  io  which   the  final   owners  of  the  real  in- 


68  The  Bargain  Theory  of  Wages. 


come  of  society  are  prepared  to  postpone  consump- 
tion. If  the  increased  demand  of  a  section  of  the 
owners  of  this  real  income  induce  another  section  of 
the  owners  to  postpone  more  of  their  own  consump- 
tion than  they  would  otherwise  have  postponed,  the 
net  result  may  be  an  increased  demand  for  labor; 
but  then  the  increased  demand  for  labor  arises  from 
the  greater  willingness  to  postpone  consumption. 
More  of  the  real  income  of  society,  not  less,  is 
offered  in  exchange  for  the  labor  which  will  create 
those  forms  of  consumption  goods  which  are  most 
in  demand.  But  if  the  increased  demand  for  com- 
modities be  universal,  if,  that  is,  there  is  less  willing- 
ness on  the  whole  on  the  part  of  the  owners  of  real 
income  to  postpone  consumption,  the  result  will  be 
not  an  increase  in  the  demand  for  labor  but  a  diminu- 
tion of  the  demand.  Since  the  laborers  who  own 
practically  none  of  this  real  income  must  be  sup- 
ported out  of  this  income  they  will  have  to  offer 
their  share  in  the  future  income  of  society  at  a 
greater  discount,  and  the  result  will  be  a  lower  rate 
of  wages.  That  this  result  never  occurs  is  due  to 
two  facts:  (i)  that  owing  to  the  law  of  diminishing 
utility  the  owners  of  real  income — made  up,  as  it  is, 
largely  of  goods  capable  of  satisfying  only  the  most 
elementary  wants — cannot  possibly  consume  the 
whole  of  it,  and  (2)  that,  in  one  large  section  of  the 
owners,  the  instinct  for  postponement  (with  a  view 
to  making  monc\-)  is  much  stronger  than  the  instinct 
which  would  lead  them  to  consume  the  whole  of 
their  share  of  this  income.     The  owners  of  the  real 


Luxurious  Expenditure  and  Wages.  69 


income  are  roughly  divisible  into  two  classes,  the 
spenders  and  the  savers;  and  an  increased  demand 
from  the  spenders  (if  that  be  possible  for  them  with- 
out selling  part  of  their  right  to  a  share  in  the  future 
income  of  societ\')  creates  often  so  much  the  more 
inducement  to  the  savers  to  postpone  their  con- 
sumption. We  can  thus  see  clearly  how  far  the 
luxurious  expenditure  of  the  rich  does  and  does  not 
benefit  the  working  classes.  In  so  far  as  it  induces 
the  other  section  of  the  owners  of  income  to  post- 
pone a  larger  amount  of  their  consumption  it  will 
benefit  the  working  classes :  in  so  far  as  it  means  a 
net  diminution  of  the  amount  of  postponement  and 
a  net  increase  of  the  immediate  consumption  of  in- 
come by  the  immediate  owners  such  expenditure 
materially  injures  the  working  classes.  On  the 
other  hand,  an  increase  of  wages  which  leads  to  a 
steadier  and  wider  demand  for  that  class  of  goods 
in  the  production  of  which  the  law  of  increasing 
returns  is  operative  ma}-  induce  the  saving  section 
to  save  more  and  thus  increase  the  amount  they 
are  willing  to  expend  in  the  purchase  of  the  in- 
choate wealth  which  belongs  or  will  belong  to  the 
laborer. 

The  third  proposition  is  to  the  effect  that  this 
\\'ages  Fund  is  distributed  amongst  the  laborers 
solely  by  means  of  competition  and  the  rate  of  wages 
depends  on  the  proportion  between  capital  and  popu- 
lation— both  these  terms  being  theoretically  under- 
stood as  elliptical  ex[)rcssions.  We  need  nc^t  attempt 
to  show  that  however  completely  wages  are  deter- 


70  TJie  Bargain  Theory  of  Wages. 


mined  in  the  present  day  by  competition,  historically 
law  and  customs  have  been  more  important  in  the 
determination  of  wages.  Had  the  attention  of 
Ricardo  and  of  Mill  been  directed  to  the  history  of 
labor  they  would  probably  have  been  ready  enough 
to  admit  the  existence  of  other  determining  forces 
than  competition  ;  but  they  would  probably  have 
continued  to  treat  the  wages  question  as  they  did. 
They  would  have  contended  that  we  can  be  practi- 
cally interested  only  in  the  (to  themj  undoubted 
tendency  of  economic  progress  to  bring  about  that 
condition  of  competition  their  theory  postulated. 
The  stage  of  law  and  custom  was,  they  considered, 
an  imperfect  development :  the  stage  of  competi- 
tion, though,  perhaps,  not  realized  completel}'  any- 
where, was  the  end  towards  which  things  were 
moving.  On  the  other  hand,  we  need  not  attempt 
to  discuss  whether  competition  is  realized  in  actual 
circumstances,  how  far  it  ought  to  be  realized,  or 
how  far  it  is  merely  a  transitional  stage  between 
custom  and  combination. 

What  we  do  require  to  discuss  is  the  ultimate  as- 
sumption that  lies  behind  this  third  proposition  that 
labor  is  a  commodity  subject,  when  it  is  bought  and 
sold,  to  all  the  laws  which  govern  the  sale  of  other 
commodities.  Tlie  \\^ages-h\ind  Theory  not  only 
treats  labor  as  a  coinmodity,  but,  if  \ve  may  take 
Mill's  exposition  as  our  standard,  as  ilie  commodity. 
The  value  of  L'lbor,  according  to  Mill,  is  always  a 
market  value,  and  the  fluctuations  of  tliis  market 
value  are   not   checked,   as  the   fluctuations   in   the 


Labor  as  a  Connnodity.  yi 


value  of  most  cominoclitics  arc,  by  the  cost  of  pro- 
duction. When  a  commodity  is  of  such  a  nature  as 
to  "  admit  of  indefinite  multiplication,"  "  the  fluctu- 
ations of  its  market  \'alue  from  its  cost  of  production 
are   within   very    narrow   limits;    but   so    far   as  the 

exceptional  case  "  of  "  comiiKKlities  not  suscej)ti- 
ble  of  beini^  multiijlietl  at  pleasure  "  the  fluctuations 
of  the  market  value  arc  in  no  wise  restricted.  "  The 
principle  of  the  exception  stretches  wider  and  cm- 
braces  more  cases  than  might  at  first  be  supposed." 

Finally,"  he  continues,  "  there  are  commodities  of 
which,  though  capable  of  being  increased  or  dimin- 
ished to  a  great,  and  even  to  an  unliniited,  extent,  the 
\-alue  never  depends  on  anything  but  demand  and 
supply.      This  is  the  case  in  particular  with  labor."  f 

Labor,  then,  is  a  commodity  subject,  in  an  ex- 
ceptional degree,  to  the  law  of  demand  and  sup- 
ply. Like  the  conimodities  exchanged  in  Interna- 
tional Trade,  where  industrial  competition  does  not 
enter,  it  is  one  of  the  simplest  cases  of  value.     The 

*  PrincipIiS,   Hook  III.,  c.  2,  p.  272. 

f  Pri)fe^sor  Marshall  j)(»inis  out  that  r\rin,  under  the  influence  of 
his  social  sympathies,  separated  the  theory  of  distribution  from  the 
tlienry  of  exchant^e  and,  owini,'  to  tlie  reniarkah!}'  slioit  time  in  wliich 
the  Priih'!f''t-s  \',ere  \vritten,  failed  to  co-ordinate  the  different  jiarts 
of  his  general  theory.  Certainly,  in  the  second  hook,  wattes  are  said 
to  he  delerndiied  by  the  proportion  between  capital  and  populalinn — 
the  demand  autl  the  supply  of  the  \\'aL,'es- bund  Tliei'ry  ;  Init,  in  the 
third  b"ok,  he  substitutes  e-paatinn  for  prnporiiMU  and  shn\vs  that 
demand  i^  uot  independent  of  b;it  dependent  on  .-upjdv,  heiti!:;  simply 
the  quantity  demanded  at  a  L,M\-eii  price.  The  consistency  or  the 
inconsistency,  however,  of  .Mill's  theories  and  expressions  is  not  our 
object. 


72  TJic  Bargain  Theory  of  Wages. 


supply  of  labor  is  not  determined  by  competition, 
but  by  an  extraneous  force,  the  principle  of  popula- 
tion; and  the  supply  is  on  the  market  and  must  be 
disposed  of  regardless  of  sacrifice.  The  demand 
being  determined  by  the  intentions  of  the  employers 
may  also  be  regarded  as  fixed ;  and  the  price  of 
labor,  therefore,  depends,  simply  and  unreservedly, 
on  the  proportion  between  supply  and  demand. 
The  value  of  labor,  therefore,  differs  from  the  values 
of  other  commodities  in  not  being  subject  to  steady- 
ing influence  of  the  cost  of  production.* 

The  value  of  labor  is  certainly  not  determined  as 
other  values  are;  but  it  is  not  therefore  determined 
more  simply.  On  the  contrar};,  it  is  a  more  com- 
plicated case  of  value.  Factors  which  have  been 
eliminated  from  the  determination  of  the  value  of 
other  commodities  are  still  present  in  the  determina- 
tif^n  of  the  value  of  labor.  Commodities,  probably 
all  commodities  but  labor,  are  placed  on  the  market, 
where  the  value  is  determined  mainly  by  demand. 
The  seller  may  come  to  the  market  with  a  definite 
idea  of  what  he  regards  to  be  the  proper  supply 
price  of  the  commodity  he  offers  for  sale,  and  may 

*  III  a  sense,  it  N\as  necessary  fur  the  cost  of  production  tlieory  of 
value  tliat  labor,  at  least,  as  one  of  the  ultimate  elements  in  the  cost, 
shiiuld  ha\e  a  value  directly  determined,  so  that  it  niii^ht  prove 
accejitalile  a--  one  of  tlie  determinants  of  the  jicrmanent  value  of  the 
C'lmniddities.  The  ost  of  pro<hiction  can  he  regarded  as  a  final 
analy-is  nf  value  oidy  if  the  respective  elements  of  the  c^st  are  fixed 
and  indeoendicnt  values.  The  method  of  makini;  lal)or  a  fixed  and 
independent  value  by  regarding  it  as  determined  by  the  equation  of 
'-upply  anil  demand  dues  not  coiiimend  itself. 


Has  Labor  a  Supply  Price  ?  73 


withhold  a  portion  of  the  supply  because  the  price 
he  can  obtain  is  lower  than  his  supply  price;  but  it 
is  the  demand  which  determines  whether  he  shall 
withhold  or  not.  Generalh^  speakin<^^  and  for  most 
commodities,  the  seller  is  forced  to  accept  the  price 
fixed  !))•  demand.  The  commodity  may  be  perish- 
able and,  in  that  case,  it  must  be  sold  re_s^ardless  of 
cost.  In  ex'ery  case  competition  has  cut  the  mar<^nn 
of  profit  so  close  that  it  is  a  c[uestion  whether  the 
seller  can  afford  to  stand  out  of  his  money  by  re- 
fusini;  to  sell.  The  Theorists,  stroni;  in  the  sense 
of  their  first  proposition,  insist  that  the  laborer  is 
also  in  the  condition  of  havint^  a  commodity  to  sell 
which  his  necessities  will  not  allow  him  to  withhold 
from  the  market.  He  must  sell;  for  his  i^oods  arc 
pecidiarl)-  perishable.  Hence  it  mii^ht  be  arc^ued 
tliat  the  suppl}-  price  of  labor  is,  so  far  as  its  effect 
on  the  market  j)rice  ij,'oes,  practical!)-  non-existent; 
anil  the  market  price  will  be  determined  from  the 
side  of  su])ply  alone  at  such  a  fii^ui'c  as  w  ill  carry  off 
the  whole  of  the  sui)pl}'.  But  the  case  is  not  so 
simple  as  it  is  thus  made  to  appear.  The  suppl\- 
price  of  the  commodit)'  has  little  effect  on  the 
market  price;  simph-  because  it  is  onl\-  a  question 
of  relati\-e  profit  whether  the  commodit)'  is  sold  or 
n^>t.  The  seller  ma\-  desire  a  hi;^lu'r  price,  but  his 
necessity  of  meeting;'  his  ol)liL;ati<)iis  may  cmpel 
him  to  place  his  whole  supj)!}-  on  the  market.  The 
onl\-  reason  that  he  can  ha\-e  for  witliholdiiiL;  part, 
or  the  \\'hole,  of  his  su])p!y,  i^  the  (piestion  of  rela- 
ti\'e    profitableness.       The    his/her    price    ^\'hic^l    he 


74  TJic  Bargain  Theory  of  Wages. 


hopes  to  obtain  may  more  than  make  up  for  the  im- 
mediate loss  incurred  by  refusing  to  sell.  There  is, 
as  a  rule,  no  other  reason  why  he  should  withhold. 
He  has  no  personal  attachments  to  the  commodity 
to  induce  him  to  withhold  it.  To  withhold  it  is  to 
incur  extra  expense  and  extra  risk,  an  allowance  for 
which  must  be  deducted  from  the  higher  price  to 
be  afterwards  realized  before  the  net  profit  appears. 
Accordingly,  since  the  maigin  of  profit  is  generally 
cut  very  close  by  competition,  the  supply  will  be 
seldom  withheld  and  the  demand  price  will  be  the 
market  price.  The  laborer,  however,  is  in  an  entirely 
different  position.  His  labor,  it  is  true,  is  essen- 
tially a  perishable  commodity  which  must  be  sold  at 
once,  if  it  is  to  be  sold  at  all ;  and  tlie  laborer  must 
sell  in  order  to  live.  On  the  other  hand,  he  is  in- 
tensel}'  interested  in  what  he  does  sell.  Labor  in- 
volves disutility;  and,  moreover,  when  the  laborer 
sells  his  labor  he  must,  so  to  speak,  deliver  it  him- 
self. The  laborer  incurs  no  expense  and  no  risk  in 
withhr)lding  his  labor;  and,  if  his  powers  are  not 
alwa}'s  recruited  in  idleness,  by  withholding  he  es- 
capes the  sacrifice  invoh'ed  in  labor.  If  it  were  not 
that  he  must  sell  in  order  to  li\-e,  his  position  in  the 
labor  market  could  be  exceptionally  strong;  and 
even  when  lie  is  thus  compelled  to  sell,  and  sell  ^!t 
once,  his  })L-rsonal  feelings,  as  well  as  his  home  and 
place  attachment,  enable  him  to  deinand  better 
terms.  Adam  Smith's  famous  statement  of  the  im- 
mobilit)'  of  Ic'ibor  does  not  justify  the  conclusion 
usualU-  drawn  froni  it. 


TJic  Disabilities  of  Labor. 


75 


"  Such  a  difference  in  jirices,  wliich,  it  seems,  is  not 
always  sufficient  to  transport  a  man  from  one  jiarish  to 
another,  would  necessarih'  occasion  S(j  great  a  transpor- 
tation of  the  most  bulk)-  commodities  not  onl}-  from  one 
l)arish  to  another,  but  from  one  end  of  the  kingdom, 
almost  from  one  end  of  the  world  to  the  other,  as  would 
soon  reduce  tliem  more  nearly  to  a  level.  After  all  that 
has  been  s;iid  of  the  le\itv  and  inconstancv  of  human 
nature,  it  appears  evidently  from  ex])erience  that  man  is 


l)orted."  * 

The  usual  inference  is  that  the  wac^cs  of  the  laborer 
must  suffer  on  account  of  his  local  attachments. 
In  individual  cases  this  uKiy  be  true;  but,  on  the 
whole,  the  ^'cncral  and  ultimate  result  is  n(^t  so  seri- 
ous as  it  might  be.  These  home  and  place  attach- 
ments form  a  hirt^e  part  of  our  personality  and  on 
them  is  based  to  a  ga'cat  extent  our  self-respect.  It 
is  not  an  extra\'agant  claim  t<^  make  that  the  self- 
respect,  e\'en  of  a  laborer  who  must  work,  has  a 
strou'g  intluence  on  wages.  If  the  worst  come  to 
the  worst  the  self-respext  of  the  laborer  would  not 
stand;  but  the  worst  seldom  comes  to  the  worst. 
The  com})(_'tition  between  maslci'  and  man  is  rarely 
a  cond)at  a  oiitraiicc.  The  emphnxu'  may  know 
that,  if  he  tried,  he  could  coerce  the  laborer  into 
subnii>si(Mi  ;  but  the  known  obstinac}'  or  fu'mness  of 
the  laborer  ma\'  pre\'ent  him  froiu  trying-.  I'lie 
larger  the  numbei'  of  Irdjiu'crs  \\-ho<e  self-respect  is 
threatened  the  greater  the  influence  of  this  factor  iii 

*    Wealth  of  IWi.'u'/ts,  p.  31. 


76  Tlie  Bargain  Theory  of  Usages. 


determininc^  the  wages  paid.  The  conflict  between 
capital  and  labor  is  not  a  personal  conflict,  but  a 
competition  to  determine  the  share  of  each  in  the 
results  of  their  common  labor.  The  laborer  obtains 
a  larger  wage  than  he  might  be  forced  to  accept  be- 
cause the  motive  for  paying  wages  is  not  the  dis- 
bursement of  a  fund,  but  the  making  of  a  profit. 
To  compel  an  unwilling  laborer  to  work  for  less  than 
he  thinks  he  is  worth  mcaiis  delay  to  begin  with 
(and  time  is  money),  and,  in  the  second  place,  it 
generally  means,  also,  less  effective  work.  Econo- 
mists all  admit  that  moral  character  enters  into 
efficiency;  and  an  unwilling  laborer,  working  under 
a  supposed  grievance  and  an  outraged  sense  of  jus- 
tice, is  not  likely  to  be  highly  efficient.  Wages  are 
determined  from  the  emplo\-er's  point  of  view  by 
the  surplus  he  hopes  to  realize  after  he  has  repaid 
to  his  capital  account  his  ex])enditure  on  wages  ;  and 
the  surplus  may  be  as  large  when  the  efficiency  is 
great,  though  the  wages  are  high,  as  it  is  when,  out 
of  a  small  product,  low  wages  are  paid. 

Labor,  then,  if  it  be  a  commodit}-,  is  a  commodity 
of  a  peculiar  kind.  It  is  a  commodit\-  which  has  a 
definite  supph*  price — a  price  which,  moreover,  it 
ma\-  be  just  as  profitable  for  the  buyer  to  i)a\'.  The 
buyer  of  labor,  omitting  the  case  oi  service,  bu}\s  to 
])r()duce,  not  to  consume  ;  and  he  acfjuires  no  j)assi\'e 
instrument  of  an  un.varying  efficicnc}'.  He  acquires 
an  instrument  of  production  whose  efficiency  is  de- 
termined, in  part,   by  moral  considerations,   an   in- 


Labor  as  a  Commodity.  yj 


strumcnt  which  may  be  wasteful,  or  provident  and 
careful,  in  the  use  of  other  instruments  and  agencies 
of  production.  The  efficiency  of  passive  instruments 
depends  o\\  the  laborer.  Conse(]uentl\',  when  labor  is 
bought,  the  [)urchaser  takes  into  account  the  differ- 
ence l)et\\een  labor  and  other  commodities,  and  is 
therefore  the  more  willing  to  make  moderate  con- 
cessions if  by  so  doing  he  can  reniove  all  unwilling- 
ness and  sense  of  unfairness  from  the  mind  of  the 
laborer.  This  is  the  reason  win-  a  body  of  laborers, 
who  must  work  but  yet  are  unwilling  to  accept  less 
than  their  self-respect  tells  them  they  are  worth,  are 
not  forced  by  their  necessities  to  accept  star\-ation 
wages.  The  employer  knows  what  he  has  to  pur- 
chase, and  acts  accordingly. 

The  value  of  labor,  therefore,  is  not  determined  as 
the  value  of  all  other  commodities  is;  because  labor 
is  not  a  commodity  in  every  respect  similar  to  other 
commodities.  Labor  is  a  commodity  which  has  re- 
tained a  definite  supply  piice  to  a  much  greater  ex- 
tent than  an}'  other  commodity  has;  and  this  supply 
price,  umler  the  moti\'es  and  conditions  of  the  hiring 
of  labor,  cannot  be  without  effect  on  the  resultant 
market  price,  because,  in  the  case  considered  by  the 
\\'ages-h\ind  Theor\-  of  hired  laljor,  the  demand 
price  of  lalDor  is  fixed  not  with  immediate  reference 
to  tlie  utility  of  the  purchase,  but  t(T  the  utilities,  or 
the  command  of  utilities,  which  labor  can  produce 
in  excess  of  th(xse  handed  over  to  the  laborer  as  his 
reward. 


TJic  Bargain  TJicory  of  Wages. 


The  War^cs-Fund  Theory,  accepted  uncritically 
for  tlie  hundred  years  of  its  growth  and  maturity, 
was  in  the  fullness  of  time  suddenly  criticised  and 
rejected;  and  in  its  stead  reigned  the  productivity 
of  labor  theory. 


CHArTER    III. 

THE    rRODUCTIVnV    ()F    LABOR   THEORY. 

THIS  theory  was  developed  as  a  criticism  of  the 
dominant  Wages- P\ind  Theory;  and,  in  the 
sur\-i\-al  of  references  and  criticisms  and  in  the  gen- 
eral point  of  view  \\hich  has  been  adopted  on  account 
of  a  too  exclusi\"e  attention  to  the  theory  criticised, 
continues  to  bear  e\'ident  marks  of  its  polemical 
origin.  The  \\'agcs-l'\ind  Theory,  was,  in  its  origin, 
based  on  Ricardo's  })ractical  limitation  (,(  capital  to 
the  fodd,  etc.,  ad\'anced  to  the  laborers;  but,  as  the 
theor}-  became  more  s\-stematic,  and  was  rcninded 
off  for  the  sake  of  illustration,  capital  came,  for  the 
purposes  of  the  theor\-  of  wages,  to  be  spoken  of  as 
if  it  were  s\'nonvmous  with  monc}';  and  the  W'ages- 
h^md  Theory  became  merel\-  a  theory  of  money 
wagi's.  The  distinction  between  real  wages  and 
moiu'}'  wages  was  duh"  made;  but  it  had  no  fuither 
place  in  the  discussion.  One  of  the  eai'liest  objec- 
tions raised  —and  the  fact  that  it  was  n.ot  raised 
earlier  is  an  evidence  of  the  hrm  hold  the  Wages- 
Fund  Theor\-   had   on  the  miiuls  of  tlw   men  of  the 


79 


8o  TJic  Bargain  TJieory  of  Wages. 


generation  between  Ricardo  and  Mill — was  to  the 
effect  that  the  wages  fund  need  not  be  absolutely 
determinate  and  predetermined;  for  the  banks,  by 
means  of  cash  credits,  enabled  an  employer,  when 
necessary,  to  increase  the  wages  fund,  notwithstand- 
ing his  former  estimate  and  "  intention."  The 
reference  in  this  criticism  is  obviously  to  money 
wages;  and  subsequent  criticism  followed  the  same 
lines.  The  distinction  between  money  wages  and 
real  wages  was  still  drawn  ;  but,  in  the  statement  of 
the  general  problem,  in  the  solution,  and  in  the 
methods  by  which  the  solution  is  obtained,  the  sup- 
porters of  the  new  theory,  Avhether  as  critics  of  the 
old  or  expositors  of  the  new,  practically  kept  money 
wages  alone  before  their  minds.  For  this  is  the 
nieaning  of  the  iteration  of  illustrations  showing 
that  labor  is  often  adwanced  to  the  capitalist  and 
that  the  product  in  numberless  instances  is  sold  be- 
f';re  the  wages  of  the  laborers  are  paid ;  and  the 
meaning  also  of  the  total  neglect  of  the  fact  that  if 
labrjr  is  paid  out  of  the  product  it  cannot  be  paid 
out  of  the  product  of  its  present  empkn-ment,  but 
out  of  the  product  of  past  emp!o\'ment.  As  far  as 
money  wages  is  C(_)ncerned,  e\'er\-thing  may  be 
)'ickled  ti)  their  contentions — except  the  immediate 
dependence  of  the  laborer  on  his  employer,  through 
whom  he  recei\'es  his  dcrivati\'e  share  of  real  income. 
The  wages  fund,  in  the  mone\"  sense,  is  not  })re- 
tletermined,  is  not  limited;  and  the  shai'e  \\hich 
labor  recei\'es  is  not  a  tjuestion  of  the  rules  of  aiith- 
metic.      W'e  ma\'  as  readih'  admit  to  the  critics  that 


Wages-Fund  Theory  and  Money  Wages.         8 1 


the  motive  for  paxiiii;  waj^cs  is  the  surpUis  of  the 
product  wliich  w  ill  remain  in  the  haiicls  of  the  em- 
plo\'er  when  the  cycle  is  completed.  The  employer, 
as  we  saw,  is  j^encrally  nut  the  ultimate  banker,  but 
the  broker;  and,  if  he  does  not  anticipate  good 
terms  when  he  rediscounts,  neither  can  he  offer  good 
terms.  The  difference  between  the  rate  he  \yx\-^ 
and  the  rate  he  charges  is  the  sole  m()ti\e  for  making 
ad\'ances  at  all.  This,  expressed  in  other  terms 
than  they  employ,  is  true  and  \-alid  as  a  criticism  of 
the  \\'agesT'\ind  Theor\',  but  it  does  not  ach'ance  us 
l)e\-ond  the  theory.  It  was  \\ell,  perhaps,  to  show 
that  even  on  its  own  ground  the  Wages-Fund 
Theory  may  be  o\'erthrown  ;  but  this  is,  after  all, 
only  a  negati\"e  contribution  to  knowledge.  The 
real  problem  deals  with  real  wages;  and  these  are. 
as  we  saw  in  the  last  chapter,  evidently  drawn  from 
a  practicall}-  fixed  and  i)redetcrmined  fund  ;  and,  as  a 
solution  of  the  real  pi'oblem,  the  producti\Mt\' theory 
is  simpl\-  an  ig)ioratio  clcnclii. 

Hut  \\e  must  follow  the  example  of  tlie  founders 
of  this  theory  in  their  criticism  of  the  \\'ages-h\ind 
Theor}',  and  discuss  the  new  theory  on  its  own 
grounds  before  we  can  ])rocced  to  the  statement  of 
a  theory  which  better  explains  the  facts  of  modern 
industrial  life,  and  offers  a  m^i-e  hopeful  solution 
cuul  an>u-er  to  the  wages  cpiestion. 

In  the  first  ch;;pter  we  found,  in  the  ])ei-i)lexities 
which  sui-round  the  relatinn  between  w;ige'<  and  the 
stand. ird  of  lix'ing.  the  difficult \-  of  detei'mining  ])v 
the  n.iechod  of  concomitant   wu'iations  the  direction 


82  Tlic  Bargain  Theory  of  Wages. 


of  the  causal  relation  ;  and  the  same  difficulty  meets 
us  again  on  the  threshold  of  the  third  theory.  There 
the  difficult)-  was  to  decide  between  \\\(i pro  and  the 
coil,  between  the  theory  and  its  critics:  here  the  diffi- 
culty is  to  decide  between  two  rival  theories  each  en- 
titled apparently  to  call  itself  the  productivity  theory. 
High  wages  and  large  output  are  causally  connected. 
This  much  has  been  established  beyond  possibility 
of  doubt.  Statisticians  have  proved  the  connection 
by  facts  and  figures  drawn  from  all  countries  and  all 
industries  and  under  the  most  diverse  conditions. 
Historical  and  contemporaneous  records  ha\'e  been 
drawn  upon  so  liberally  that  sometimes  we  can 
hardl)'  see  the  \\'ood  f()r  the  trees.  I^ut  which  is 
cause  and  which  effect  has  not  been  so  clearly  prcn-ed. 
\\'hether  is  high  wages  the  cruise  of  the  large  out})ut 
or  the  large  output  the  cause  of  high  wages  ?  This 
is  not  clear;  for  we  ha\-e  two  riwal  theories  each 
ap[)caling  to  the  arbitration  of  the  same  facts,  and 
S(Mne  writers  wir^'ing  from  the  one  theor\-  to  the 
other,  with(nit  recognizing  the  essential  difference 
between  them.  The  one  theory  maintains  that  high 
wages  precede  and  gi\"e  rise  to  an  increased  protluct 
wliich,  in  time,  j^rox-ides  the  justification  of  the 
higher  wages.  The  other  is  the  con\"erse  of  the 
first,  and  asserts  that  high  wages  are  ])aid  where  the 
t;lfici'jnc\'  of  lal)or  is  great,  and  are  p;u"d  on]\'  because 
the  eOk'ienc}'  is  great.  Since  the  riwil  theories  ap- 
j)eal  to  the  same  facts,  the  di\-ergenci„'  between  them 
appL'ars  more  clear]\-  in  the  practical  conclusions 
than  in  the  the(_)retical  statements.      The  exponents 


Tivo  W-rsio)is  of  tJtc  Productii'ily  Theory.        83 

of  the  first  arc,  general  1\',  to  be  found  anioni_;'  those 
who  desire  State  or  numieipal  interference  on  behalf 
of  labor;  and  their  apijcal  is  to  histor\-  to  justify 
what  the}'  admit  to  be  a  leap  in  the  dark.  The}' 
arc  distiiv^uishcd,  at  preseMit,  b\-  their  athocac}'  of  a 
shorter  workini;^  da}-  or  of  profit -sharin^^  and  other 
schemes  to  iinpro\e  the  relation-,  between  enii)]o}-ers 
and  enipIo}'cd.  The  supporters  of  the  second  ver- 
sion are  the  most  ardent  promoters  of  indu'strial  and 
technical   education   and    otlier   direct    and    indirect 


The  first,  which  is  probabl}'  the  version  of  tlie 
thcor}'  most  <4enerally  adopted,  on  a  first  anal}'sis, 
seems  to  be  little  more  than  a  le-^s  simple  and  naYve 
foi'iu  of  the  sub-i-^tcnce  tlieor}'.      The  proposition  on 


^\•hich   it   rests  is  that  hi;_;her   wa^es   can  be  paid  be 

cause   the   L;'reater  eftlcienc}'  \\ ' 

hiL^dier  wa_L^es  wi 

is  admitted,  in   all   but   term 


--^  _.     —  ^ 

.'hich   results  frt)m  the 
It 


er\-e  to  recoup  the  emplo}'er. 
IS  acimittea,  m  an  but  terms,  that  the  ad\"ance  of 
\\'a_!.;"es  is  a  lerij)  in  tlie  dark',  but  a  leap  experience 
shows  to  be  moi'e  than  mere  ra'-hness.  The  hi_L;her 
waives,  the  ai'^unient  run,-;,  will  enable  the  la!)orer  to 
eat    better   fooel   and   wear   l)L'ttt'r  cli)thin;_;'   and   li\'e 


eat    better   fooel   and 

;^'-ener,ill\'  under  more  fa\-oi',d)le  C' uulilii  >n<.      .      . 

are  the  su[)portei's  of  this  \-i:r>iMn  wf  the  theor}-  that 
there  is  a  \'er\'  close  a.nd  tlefmite  relation  between 
l)eti.er  lixan.;'  and  Ijetter  w  oi'k  that  the}"  ha\'e  neither 


84  The  Bargain  Theory  of  Wages. 


scrupled  nor  hesitated  to  indulge  in  a  good  deal  of 
miscellaneous  condemnation  of  those  short-sighted 
employers  who  cannot,  or  will  not,  read  the  lessons 
of  history. 

Yet  the  very  facts  which  they  adduce  in  support 
of  their  contention  seem  to  afford  some  sort  of  justi- 
fication for  the  "  short-sighted  "  employer.  An 
employer  may  recognize  fully  that,  in  the  long  run, 
higher  wages  might  not  be  a  bad  investment,  and 
yet  be  unable  and  unwilling  to  make  the  experiment. 
The  laborer  sells  his  labor,  but  he  remains  his  own 
master ;  and,  when  his  contract  has  expired,  may  take 
himself  off  when  he  pleases.  We  do  not  hear  so 
much  nowadays  of  Jcshurun  waxing  fat;  but  the 
danger  of  the  sequel  may  reasonably  enough  impress 
the  mind  of  a  cautious  employer.  He  pays  better 
wafjes  and,  after  a  time,  the  laborer  is  able  to  do, 
and  probably  does,  better  work;  but  before  the  em- 
ployer has  been  fully  recouped  for  his  advantages 
the  laborer  may  take  himself  off.  It  is  true  that 
there  is  not  ver\-  much  reason  why  he  should  change 
his  employer;  but  the  chances  and  changes  of  life 
are  iiifinite.  The  experience  of  other  employers  and 
of  other  countries  and  the  evidence  from  industrial 
history,  then,  may  render  the  successful  issue  of  the 
experiment  very  probable;  but  they  do  not  guaran- 
tee the  individual  employer  against  risk.  Tlierefore. 
althougli  it  may  be  admitted  that,  where  wages  are 
ver\'  low,  the  return  to  the  in\-eslment  may  come  so 
quickl}-  that  the  risk  is  very  small,  it  does  not  follow 
that,  when  wages  are  not  extremely  low,  the  result 


TIic  Leap  in  tJtc  Dark, 


85 


will  be  so  ininicdiatc  ;iiul  so  fa\'(irable.  Similaii\-, 
alth()u_i;li  the  cx[)cn'cncc  of  I^n^iaiul  \\\  the  workin^^ 
of  the  l'\ictor)-  Acts  aiul  the  shorteniiiL;"  of  the  liours 
of  labor  nia\-  justif\'  experiments  in  (ierniany  and  in 
the  Unitetl  States,  it  does  not,  and  cannot,  proxe 
that  the  next  experiment  iii  EnL;iand  in  the  same 
direction  will  be  a  success.  There  is  some  limit  to 
a  [)ri)fitable  retluction  of  hours  as  there  is  to  an  eco- 
nomical intensification  of  labor;  and  it  may  be,  as  a 
witness  before  the  Canadian  Labor  Commissicjn  put 
it,  that  a  further  reduction  "  mii^ht  be  the  last  straw 
which  sometimes  breaks  the  camel's  back."  * 

The  opinion  of  the  witness  as  to  the  particular 
limit  ma\',  or  ma}'  not,  be  C(,)rrect,  but  there  is  no 
doubt  that  there  is  a  limit.  The  lar^-er  the  number 
and  the  i^reater  the  extent  of  the  earlier  ex})eriments, 
the  more  uncertain  will  be  the  issue  of  the  next  one. 
The  statistics  cpioted   show  that  there  is  some  <^rood 


*  Cauadiiin  lAihor  Coiinni ;si.vt ,  Oiitari')  I'vi^lcnce,  p.  744.  Mr. 
Tuckett  (tobacco  nianufacturcr,  1  Faniilton).  \Mtnfss  had  reiluced 
tlie  hours  in  hi>  factory  from  ten  to  nine  without  making  any  re(hic- 
tio;i  (.f  wa_L;cs  or  findiii;^  any  rcthiction  in  the  pro(hict. 

"  O,  I  laviiiL;  founil  the  niiie-iiour  movement  |irof'itahle  and  satis- 
factory, Could  you  not  reduce  it  still  more  with  the  >ame  result?  A. 
It  miL^ht  he  the  last  straw  which  sonietime^  hreak^  the  camel's  hack, 

"  H-  "^''^i  think  that  nine  hours  i-,  a  fair  limit?  A.  I  think  so; 
fr<>m  what  I  have  seen  and  heard  I  thiid<  it  lla^  proven  to  he  about 
the  limit. 

"  <^>.  \'oii  have  not  tried  any  other?  A.  Of  cour'-e,  T  am  only 
speakitiL^'  of  wliat  I  have  rea<l  in  the  paper-  of  the  1,'nited  States.  I 
tind  that  the  jumpinL;  into  the  eii^ht  hour-  ha-  cau-ed  a  _L;reat  deal  of 
trouble  :  it  is  going  too  far  the  other  way.  Idiere  is  always  a  happy 
medium."  « 


86  Tlie  Bargain  Theory  of  Wages. 


ground  for  hesitation.  \Mien  wages  are  arbitrarily 
raised,  or  when  hours  are  reduced,  the  output  does 
not  always  increase  proportionally;  and  unless  the 
efficiency  of  the  laborer  increases  at  once,  and  pro- 
portionally to  the  rise  in  his  wages,  or  unless,  in 
spite  of  the  reduction  of  the  hours,  the  output  is  at 
least  maintained,  then  the  profits  of  the  employer 
suffer.  However  willing  the  employer  may  be  to 
wait  to  recoup  himself,  the  conditions  of  competition 
may  not  permit  him  so  to  wait.  If  he  is  carrying  on 
business  on  a  borrowed  capital  and  has  to  meet  obli- 
gations from  day  to  day,  the  margin  is  probably 
already  cut  too  close  to  allow  him  to  lock  up  part  of 
his  resources  in  the  hope  of  a  somewhat  uncertain  re- 
imbursement. If,  moreo\-er,  in  the  market  he  has 
to  meet  competitors  who  are  not  making  any  experi- 
ment and  not  incurring  any  loss,  even  for  the  time 
being,  it  may  be  impossible  for  him  to  maintain  his 
ground,  and  thus  a  temporary  loss  ma}-  turn  out  to 
be  final  and  irretrievable.  The  English  manufacturer 
fears  the  competition  of  the  foreigner,  and  the  New 
England  manufacturer  the  competition  of  the  new 
mills  in  the  Southern  States;  and  they  declare  that 
in  face  of  this  competition  they  cannot  safely  lock 
up  part  of  their  resources.  If  a  manufacturer  hesi- 
tate to  add  one  other  element  of  uncertaint}-  to 
business,  he  is  at  any  rate  not  open  to  the  charge 
of  being  short-sighted.  \w  empl<)}-er,  strong  in  his 
resources,  strong  in  the  hold  which  he  has  on  his 
customers,  and  strong  also,  perliaps,  in  the  attach- 
ment of  his  men  to  his  service,  mav  be  able  to  make 


F/uc/ nations  of  W'cr^i^cs  and  Ontpnt.  87 

such  experiments;  and  in  this  case,  as  in  many 
others,  as  Professor  Walker  has  shown,''''  it  is  the  in- 
competent employer  who  is  the  worst  eneni)-  of  the 
workiiiL^  classes. 

The  hii^her  the  wa_L;'es,  and  the  hiL;her  the  standard 
of  comfort,  the  more  uncertain  does  it  become  that 
the  standard  of  elficienc}'  will  rise  with  e\'er\'  rise 
of  wa^'es.  howe\'er  sli_L;ht,  and  I'ise  correspondingly. 
Hrentano,  howex'er,  takes  the  position  that  they  do. 
In  his  Hours,  Waters,  and  l''ro({!ictioii,  he  claims  that, 
in  the  }'ears  1872,  '"JZ^  '74-  pi'oduction  increased 
and  then  diminished  as  waives  rose  and  fell: 

"  According  to  the  official  records,  the  \car  of  the 
great  rise  in  wages  in  the  largest  state  mines,  1S72,  was 
followed  hy  a  c-onsiderahle  increase  in  the  a\'erage  (jut- 
put  of  the  workmen \iiotlier  official  investi- 
gation, eiiti'ded  '  C'lMUrihut ion  to  tlie  Statistics  of  the 
Portnunul  Mining  histricl,'  1)\-  a  mining  official  named 
lliltrop,  showed  in  fact  lliat.  in  tlie  al)<)\-e-nained  mining 
district,  the  general  fall  of  wa.ges  in  1S74  was  accom- 
panied hv  a  thmiinilion  of  production.'' f 

The  fngures  und(ud)tedl)-  show  that  the  output 
increased;  and  we  know  that  there  was  a  rise  in 
wage's  I  the  figures  of  wiriations  in  wages  are  not 
gi\'en,  in  this  in-tan.ce.  for  comparison  1:  hut  we 
ha\-e  still  to  'Settle  which  was  cause  aiul  winch  effect. 
The   ihictuatioiis   of   wages   in   the>e   \-ears   followed 

*  Walker,  Py.itical  Ec.-'>u^":y.   Part   IV..  clMp.  iv. 

t  fiiLaifann,  lloin:.    n',\  .•■...  .n:d  l'>\,iiiition.  pp.   ii.  12. 


The  Bargain  Theory  of  Wages. 


each  other  quickly.  Higher  wages  can  lead  to  in- 
creased efficiency  only  if  they  are  spent  in  such  a 
way  as  to  improve  the  physical  condition  of  the 
workers;  and  the  tradition  of  the  extravagant  ex- 
penditure of  the  working  classes  during  these  years 
— feeding  their  bull-dog  pups  on  cream,  as  the  Mid- 
lothian miners  were  said  to  do — shows  that  the  higher 
wages  were  not  necessarily  so  spent.  A  sudden  in- 
crease of  wages,  unfortunately,  frequently  means  an 
increase  of  dissipation.  Chancellors  of  the  Exchequer 
have,  on  occasion,  lamented  with  somewhat  chas- 
tened sorrow  the  increase  of  the  rc\-enue  from  ex- 
cise during  years  of  prosperity;  which  means  that 
the  increased  wages  are  not  being  spent  in  a  manner 
which  will  increase  efficiency. 

The  causal  connection,  in  this  instance,  is  almost 
surely  from  })roduction  to  wages.  Prices  rose  and 
the  mine-owners  and  other  employers,  naturally  de- 
siring to  take  full  advantage  of  the  rise,  endeavored 
to  increase  their  output.  The  emplo\'ces  were 
avrare  that  prices  were  rising  and  demanded  their 
share;  and  the  em[)l()yers,  rather  than  face  labor 
troubles  at  such  a  time,  yielded  the  demand,  being 
willing  to  sacrifice  a  part  of  the  increased  profit 
rather  than  lose  the  whole. 

Brcntano's  argument  is  e\'idently  based  on  the 
assumption,  wliich  we  cannot  admit,  that  the  laborer 
at  all  times  works  up  to  his  efficienc\',  and  tiiat  an 
increase  r)f  his  output  must  be  due  to  <'in  incrcjase  of 
his  efficienc}'.  But  the  laborer  does  not,  as  a  rule, 
do   his   best;   and   his  output   might   be  largely   in- 


Output  and  tJic  Standard  of  Efficiency.         89 

creased  without  any  chant^e  in  the  standard  (jf 
efficienc)-.  If  we  take  the  actual  output  as  a  measure 
of  efficienc)-,  we  are  stating  a  merely  identical  propo- 
sition when  u  e  assert  that  the  increased  output  is 
due  to  a  rise  in  the  standard  of  efficiency.  An  in- 
crease of  waives  can  cause  a  rise  of  efficiency  onl}'  if 
each  laborer  is  doin<4'  his  best;  ami  the  trade-union 
and  i;"eneral  workinL;'-class  objection  to  the  man  who 
work's  his  hartlest,  which  Mr.  Schloss  describes.''' 
shows  us  that  we  cannot  me.isure  efficienc}'  mereh' 
b\'  output.  Aw  increase  of  the  (nitput  mi^iit  occur, 
e\-en  without  ;i  rise  in  wai^^es  and  a  conserjuent  im- 
prox'ement  of  the  standard  of  li\-inL[,  if,  in  some  wa}- 
or  other,  by  a  ch<'m_<4"e  (>f  the  method  of  remuneration, 
as  in  profit-sharing",  for  instance,  the  Irtborer  could 
be  induced  to  worlc  up  to  his  efficiency.  There  may 
be  other  methods,  but  the  surest  methotl  of  induciiv^; 
a  man  to  the  best  that  in  him  lies,  is  to  offer  him 
the  })rospect  of  hiL;iier  waives.  I'his  is  what  actualh' 
happened  in  the  earh'  se\"enties.  The  mine-owners 
paid  hi_L;her  wa_L;es  and  _i;ot  more  work  out  of  their 
lab()rers;  but  the  miners  did  not  spend  the  increase 
in  makin;^  tliemsel\-es  more  efficient,  and  so  it  came 
about  that,  when  depression  occurred,  and  the  mine- 
owners  no  Ioniser  offered  tlie  inducement  to  extra 
exertion,  the  mini'rs  fell  l)ack  into  their  old  hal.iits 
and  came  just  as  much  sliort  of  tJK'ir  efhcienc}'  out- 
put as  be'fore.  Had  lliey,  b\-  wise  (.■x[)eiulilure  (")f 
the  hiL^'her  wai^^'s,  made  them-^ek'es  more  efficient, 
the  out[)ut  would  not  haw;  fallen  back  to  its  former 

*  Sclilo.-s,    T'U-  Mc'l'u'Js  of  hidtistfi.il  R<tintiicyaticn. 


90  TJic  Bargain  TJicory  of  Wages. 


lc\X'l,  even  supposinc^f  their  old  slovenly  habit  of  not 
doing  their  best,  without  special  inducement,  had 
reasserted  itself.  Their  best  then  would  ha\X'  been 
so  much  better.  A  more  "  plentiful  subsistence," 
will  no  doubt  increase  the  output,  but  it  is  not  the 
only    nor    an    immediate    method    of    increasing    it. 

The  wages  of  labor  are  the  encouragement  of  in- 
dustry," and  high  -wages  operate  directly  to  make  a 
man  come  up  to  his  standard  of  efficiency.  If  the  high 
wages  continue,  and  are  wisely  expended,  indirectly 
they  ma\-  also  helj)  to  raise  the  standard  :  but  since 
the  standard  of  comfort  can  be  raised  onl\-  gradually 
and  slowl}-,  rmd  efficiency  can  onl\-  be  slowly  changed 
as  the  result  of  a  more  ])lentiful  subsistence,  the  in- 
direct effect  cannot  be  ain'thing  like  so  ai)i)arent,  or 
so  immediate,  as  ])rentano  asserts  it  to  be. 

]]ut,  e\'en  under  the  assum[)tion  that  an  increase 
of  the  out}:)ut  can  be  only  due  to  an  increase  of 
efficiency,  the  comjKiratix'e  statistics  on  which  so 
much  reliance  is  placed  to  pro\'e  that  higiier  wages 
increase  efficiency,  do  not  bear  out  tlie  conclusion. 
What  should  Ije  iprr)\-ed  is  that,  for  e\'ery  rise  in 
wages,  the're  is  a  crirresponding  increase  in  the  out- 
])ut  :  what  is  ])rf)\'ed  is  that  e\eiA'  rise  of  wages  is 
accompaified  b\-  an  increased  r)utput.  We  can  best 
malv'e  clear  tlie  hiatus  in  the  proof  jjy  taking  tlie 
comparali\-e  tables  and  exjires-iug  tlieni  as  \-ariati(jns 
from  a  common,  index  number.  Take,  for  i;i>tance, 
the  table-s  (juoted  bv  Ih'entano  com])aring  wages  and 
output  in  the  textile  industries  at  different  [)eriods 
and  in  different  countries, 


J^an'atious  of  Output  aud  Waives.  91 

CUMTARISUN    (^l'"    \VA(.i;S    AM)    Ol    Tl'l'T    OK    COTTON' 

sriNM'.Ks,  i;x(;i.ANi).* 

A  \'  1:  K  A I ;  !■•.  I  •  K 1 1 1  n  •  < :  r  A  \'  v.  r  a  ( ;  k 

"•-'^^^'^'-  i'KKWMKKKK.  WAC.F.S. 

iS44-4() 100    100 

1^5')-''! 133    113 

iS-^o-.'-c 21 H^   154 

comparison  of  waci-.s  and  outl'u'i"  of  cotton 
\vfavi:rs,  i:  no  land.* 

AVKIiACK  AVEKAC.F, 

PERIOD. 

rKoDicr.  WAi-.Ks. 

1844-46 100   100 

iSS'H',! 192   125 

i33o-Si 243    159 

INTERNATIONAL  COMI'ARISOX  OF  WAGES  AND  OUT- 
PUT IX  WEAVING.* 

WEEKLY 
COUXTKV.  OI'TTUT.  \V\I' 

Germany loo       loo 

EiiLjlaiid 153.6    139.5 

I\TERNA'TION.\F   COM  I'.VRISOX  OF  WAGES  AND  OUT- 
PUT   IN  COAL   .MIN'LN(;.  f 

ANNUAL 
OrNTRV.  OUTITl.  ^^.^^,^^^_ 

L'niif'l  M.ito,  I'^So loj  100 

Peiiii^\"lvaii;,i,  lS-^o 14-)  103 

Niirih  SlalTuril>liirc,   13^4 -4  77 

Saarhrru-k  C^  .llicries    6-^  (.9 

Diirttmm.l  Cnll;crics 74  (o 

The  o'Liicral  ar^iinK-nts  in  ta\"(>i'  of  .-^hortor  liours 
arc  ()[)cn  to  siniihu'  o!)jt.-cti<  ins.  'I'hci'c  is  tlic  same 
hiatus   in   the   pi'oof  that  shorter  hours  mean  hu'i^^er 

*  I'.rcntaiio.  1',''.  cit..  np.  ''12.  ^S. 

t  Schociihiif.  /u-'ii.'i)iy  ,'j'  /['  -i)  ir.:_;\s.  y.  209. 


g2  TJie  Bargain  Theory  of  ]Vages. 


production.  We  are  concerned  only  with  that  part 
of  the  agitation  for  a  sliorter  working  day  which 
chiims  that  wages  need  not  be  reduced  correspond- 
ingly. If  the  working  classes  will  submit  to  a  re- 
duction of  wages  corresponding  to  the  reduction  of 
hours  the  problem  becomes  entirely  different  and  has 
nothing  to  do  with  the  theory  that  a  higher  standard 
of  living,  whether  made  possible  by  higher  wages  or 
bv  greater  leisure,  is  the  cause  of  greater  efficiency. 
The  figures  do  not  bear  out  the  contention  that  be- 
cause greater  leisure  means  greater  ef^ciency  an  em- 
ployer may  safely  continue  to  pay  the  same  wages 
per  week  after  he  has  reduced  the  hours  of  labor. 
In  the  l:)ng  run  this  may  be  the  result,  but  there 
will  be  immediate  loss  to  the  employer,  which  he 
may  not  be  able  to  afford.  The  change  is  an  ex- 
periment and  an  experiment  has  never  a  certain 
issue.  The  argument  demands  a  closer  connection 
between  mere  physical  strength  and  efficiency  than 
actualh-  exists.  The  difference  betVvX'en  a  working 
week  of  sixt\-  and  a  week  of  fift\--eight  does  not  gi\-e 
so  much  more  time  for  rest  and  recreation,  does 
not  imj^l)-  so  greatly  diminished  a  demand  on  the 
energ}-  of  the  worker  that  we  can  look  for  hini  to 
make  u})  fr(jm  this  source  alone  the  wages  of  the 
two  hours  he  has  sacrificed.  He  nic'iy  work  harder 
in  order  to  still  e;irn  his  old  weekly  wages:  but  that 
is  not  the  meaning  of  the  assertion  that  the  shorter 
hours  ha\-c  made  it  possible  for  him,  for  the  fir>t 
time,  to  worlv  harder.  In  the  long  run  ^\■e  ma\-  ad- 
mit  that   the  contention   may  be  borne  out   b\-  the 


TJic  Leap  ill  the  Dark. 


93 


facts;  but  the  thccin-  implies  that  it  is  borne  out  in 
the  sh<M-t  run  ;  and  in  so  cloin<^r  it  tries  to  prove  too 
much.  The  rechiction  of  hours  where  the  workini^ 
day  has  not  previously  l)een  excessi\-e,  without  a 
corresponch'ni;'  reduction  of  the  dailv'  or  the  weekU' 
waives,  is  an  industrial  experiment  whicli  the  issue 
ma\-  or  ma\'  not  justify.  It  may  be  that  the  em- 
ployer is  as  a  rule  over-cautious  in  makinc;"  the  experi- 
ment," but  it  oui^ht  to  be  admitted  that  he  is  beini; 
asked  to  make  an  experiment. 

*  This  general  argument  against  shortening  the  hours  of  lahor 
wliicli  an  imliviihial  eni[iloyer  may  justiliaMy  use  is  freijuently  sup- 
plemented by  the  (leclaralion  that  where  machinery  is  largely  em- 
ployed the  el'ticienry  of  the  laborer  has  no  effect  on  tlie  product.  'I'his 
argument  find.-,  empliatic  and  enlightened  eNi)ression  in  an  artiide  on 
Factory  Legislation  in  the  I'nited  States  in  Btdlct'ni  of  tltc  Xational 
Association  of  //Vi'/ J/(/;//c /J/. 7//;-(V'j  (  September,  iSij^).  "A  given 
amount  of  machinery,  no  matter  how  perfect,  caunnt  be  so  speeded  as 
to  turn  out  a  ]>ro(hict  in  fifty-eiglit  liours,  equal  to  that  of  the  same 
machinerv  running  si\t}-  hours  ju.-t  o-ver  the  biudt-r  line.  ...  It  is. 
iheref'  're,  true  that  the  difference  of  two  hnur>  a  \\'eek  between  Massa- 
chusetts and  Rhode  I>lan.d,  a»uming  that  wag'es  are  the  same  in  both 
States  notwdthstandir.g  that  dilTerence,  mav  be  ample,  in  and  of  itself, 
to  make  the  difference  betweeii  running  the  mill  at  a  pr-.'fit  and  running 
it  at  a  loss.f  ...  A  steam  engine  will  di-i\-e  machinery  at  the 
same    rate  of   speed    thew')r]d    over,      A    modern    spindle   will  make 


+  "  .\s  it  is  ivuv,  a  Rho 
thi)iisani|  >-:irIs  por  wcvV. 


Islind 
r  ,T  inilii 


ill  of  twn  tlinii';:,n'l  Ijoius  cr.n  pr'^liire  twenty 
!i  y.ir'ls  per  ye.ir,  ni'ire  (if  print  cli  th  tli.m  one 


in  M.issaolinsotts,  :-s  t'le  differeiiee  l-ofAeo'n 
(i;-ston  C,'!!!»:r>\'i.-l  /oy/7.7/a' i,  Ihis,  liou 
re.issertii 'H  of  .m  oM  r.i'l,ii;y  ti::it  r,i  loMnei ) 
sli^lit  (iein.mds  i  'i  tlie  .  r.er^-y  of  the  '  -v-r  it:-, 
]-l:it;lish  fai_li  ry-owiiers,  and  under  inilio.  n-  < 
(lei  lared  that  the  faetory  system  h,.d  he  -a: 
bitterest  onrse.  'rhe  same  line  -f  arannant 
mission  the  writer  in  the  liuil'th:  is  iie  linei 
more  pro-luetivc  than  a  thirteen  or  a  fourtee 


y-ei 

alu  a 

■:\'\  si  vi  y  leal 

r-  per  v.ee 

k  ■• 

r.  i 

.  hr-l 

■■  ne  re  t'l  m  , 

in  iimpaali' 

ficd 

-es 

a>e  A 

"";'''^''"  ■■ 

i,d   r..a'kes 
at  1  a'  t ha-  e 

but 
irlv 

thi 

s  iile; 

X  lle-ehhr  >! 

r  Rd.ert  I 

>cel 

ist, 

■.u\  ol 

;  ahlessinu  t. 

)  a  nation. 

its 

\\\i\ 

also 

d;-p,.se..f  tl 

•c  -eacra! 

ail- 

m 

dse,  t 

h  u  an  eleven 

hours'  da 

s'  is 

94 


The  pHirgaiii  Theory  of  Wages. 


This  first  \-cr.sion  of  the  productivity  theory,  which 
asserts  tliat  tlie  direction  of  the  causal  rehition  is 
from  hiy,"her  \vag;es  to  increased  production,  resembles 
the  more  scientific  statements  of  the  subsistence 
theory  in  one  important  particular.  Both  theories 
recognize  that  it  is  necessar}-  to  prox'ide  some  sort  of 
justification  and  assurance  that  the  industrial  experi- 
ment of  pa\-ing  higher  wages  AX'hich  they  propose 
\\\\\  not  lead  to  a  disastrous  issue.  In  the  one  case, 
the  higher  \vages  which  are  in  consequence  of  a 
higher  standard  of  life  are  pro\'ed  to  be,  in  the  long 
run,  economical  and  tlierefore  justifiable.  Higher 
wages  mean  an  increased  demand  for  commodities, 
and  the  demand  of  the  working  classes  is  so  great 
and  so  stead}'  that  more  economical  processes  of 
prcjduction  can  be  introduced  and  the  total  output, 
therefore,  increased.  In  the  second  case,  the  higher 
wages  lead  directly  to  an  increase  in  tlie  efficiency 
of  one  of  the  agents  of  production,  labor,  not  capital 


9i.)f)0  revo]uiif)r.s  per  minute,  wliether  lr)cate'l  in  Mabsachu>etts  or  in 
the  Piedni'iiit  rei;ion  of  llie  South.  A  lnnni  adjusted  to  150  jiicks 
]ier  minute  in  ilie  one  section  will  Ije  adjuste'.l  to  tlie  same  speed  in 
anotlier.  Xc^  aiJi-Iiance  of  \'a:ikee  inL;eiiuity  for  reducing  labor  co.st, 
saN'iiig  material-,  or  expediting  pjroce.-ses,  fails  of  adoption  everywhere 
as  soo!i  as  its  vai::e  is  {jroven. 

'■  It  follows  tliat  in  a  State  where  ten  hours  is  the  legal  day,  the 
jiroduction  (jf  a  mill  will  not  e'lual  by  ten  ]>er  cent,  the  production  of 
a  similar  mill  engaged  ujion  the  same  cla-^  (J  ^^■ol■k  in  a  State  wliere 
ele\'en  li.jurs  coii.stitute  a  day's  W(jrk,  [irovided  that  the  management 
i-  eijually  elTicieut. 

"  'Idii-  is  as  su-ceptible  of  jiroof  as  a  jiriiblem  in  mathematics.  It 
lia-.  in  fact,  been  repeatedly  demon-^trated  in  tlie  experience  of  New 
K;,gla);d  mahub.cturcr>  "  (i-i).  2r,4-2G6). 


Sfcof/d  Version  of  the  rrodiiciivity  Theory.      95 


ill  this  instance,  and  conscciucntly  to  a  lari^fcr  cnit- 
put.  In  both  cases  the  acKance  of  \\<ii;es  is  arbi- 
traiA',  and  in  a  sense  accidental,  but  tlie  advance 
sets  forces  at  work  which  in  the  lon^'  run  proxade 
an  ex  post  faet(y  justification  for  the  acKance.  In 
the  loni;'  run,  there  is  no  cUjubt  that  an  adxance  of 
waives  will  justify  itself,  econondcalh',  either  in- 
directl}'  as  the  first  theoi"\'  or  direct!}'  as  the  second 
su<;'g"ests:  the  trouble  is  that  a  failure  of  the  coinci- 
dence of  the  short  run  and  the  loni;  run  nia\-  pre\"ent 
the  trial  of  the  experiment  altoi^ether. 

The  other  version  of  the  theor\-  lias  more  to  com- 
mend it.  It  a[)proaches  the  problem  from  the  ri^ht 
end  and  does  not  neetl  to  postulate  industrial  ex- 
periments to  pro\-e  its  truth.  It  takes  its  stand  on 
the  iiulisputable  fact  that  when  more  is  produced 
the  empIo\'er  can  aUord  to  pay  more,  absoluteh',  if 
not  relati\-eU-.  for  labor;  ami  asserts,  or  assumes, 
tliat  competition  will  transfer  to  the  laljorer  all  that 
he  has  produced.  This  is  the  form  of  the  produc- 
ti\-it\"  theor}-  which  should  commend  ilsclf  to  the 
employer,  for  it  iiu'oKes  no  addition  of  uncertaint}' 
or  risk  to  business,  and  demands  no  leaps  in  the 
tlarlc.  I'ecausc  of  the  po--sibility  of  x\"aste  of  the 
raw  material  or  of  carL'lessne>s  in  the  handlini;'  of 
delicate  machiner\-,  the  ad\"ocates  of  this  x'ersion  .ire 
read}'  to  admit  that  it  is  better  to  pa\-  hi;_;her  wa^es 
than  to  pa\'  low,  and  L;i\'e  their  consent  to  the  doc- 
trine of  the  economy  oi  lii;j,h  w,i';i>.  Ihit  the\-  reject 
the  po])ul.u'  inference  that  the  oid\'  wa\'  to  increase 
productii>n    is   to   rai>e  waL;es.      \\'aL;cs  ma\',  for  the 


g6  TJic  Bargain  Theory  of  Wages. 


time  being,  rise  above  the  efficiency  limit;  but,  in 
the  nature  of  thiiigs,  such  a  rise  must  be  temporary; 
and  their  contention  is  that,  in  the  long  run,  the 
only  real  and  effective  measures  for  raising  wages 
are  those  which  seek  to  raise  the  standard  of  the 
laborer's  efficiency.  A  rise  due  to  any  other  cause 
is  accidental :  a  rise  of  wages  which  follows  from  in- 
creased efficiency  will,  in  all  probability,  be  a  per- 
manent rise  because  it  has  been  granted  on  account 
of  the  competition  of  employers  among  themselves. 
Higher  efficiency  of  labor  gives  the  possibility  of 
greater  profits,  and  the  prospect  of  higher  profits 
means  keener  competition  among  the  employers  for 
workmen  and  the  consequent  transfer  to  the  workers 
of  the  whole  or  the  greater  part  of  the  extra  profits. 
Competition,  ho\ve\-er,  is  not  so  active  in  the  inter- 
ests of  the  workers  as  this  version  assumes,  because, 
in  the  first  place,  the  competition  of  the  masters 
with  each  other  for  labor  is  offset  by  the  competi- 
tion of  laborers  with  each  other  for  employment, 
and,  in  the  second  place,  the  comi)etition  of  the 
masters  is  rapidly  being  replaced  by  combination 
and  joint  action. 

Care  is  not  al\va\-s  taken  to  distinguish  whether  it 
is  the  increment  of  the  output  due  to  the  increased 
efficiency  of  labor,  or  more  or  less  than  this  amount, 
that  is  transferred  to  lab<M-  b\'  competition;  and  fre- 
quentl}-  confusion  has  arisen  on  this  account.  There 
are  obviously  other  means  of  incrca>ing  the  ')Utput 
than  raising  the  efficienc}'  of  labor,  and  the  ques- 
tion  which   this  \"ersion   seems,   ex  liypothesi,  to  de- 


hicrcascd  Output  niid  fiirrcnsfd  l\'<7_<^rs.         97 


cidc  in  the  nL'i(.iti\c  is  wheUicr  lalxir  obtains  an\- 
share  of  the  increase  in  the  prothict  uhicli  has  arisen 
from  an\-  other  cause.  To  achnit  that  labor  ch)es, 
or  can,  recei\-e  a  share  of  what  it  thd  not  lielp  t(.) 
create  is  t.>  .ibanclon,  or  at  least  to  nioclif}-  scriousl\-, 
the  productivity  theory  and  to  substitute  for  a  law 
of  waives  the  merely  \-a;^me  and  i^eneral  statement 
that  out  of  a  lar^^er  prc)duct  lar^^er  wa^es  can  be 
paid.  If  labor  pcrmanentl)'  receix'es  either  more  or 
less  than  the  amount  fixed  b\'  its  efficiency,  we 
must  altoi^ether  abandon  the  notioi:  that  Ldjor  re- 
cei\'es  a  determinate  share,  ;is  b\'  ri;_;']it,  or  achjjjt,  in 
its  place,  the  make-shift  explanation  that  labor's 
share  of  the  pr(Hluct  is  residucd. 

A  close  examination  of  the  facts  seems  to  indicate 
that  the  one  alternative  or  the  other  must  be  ac- 
ce[)ted.  The  i^a'cat  increase  of  the  product,  which 
comparati\'e  statistics  show,  has  not  been  due,  in  any 
lari^e  dei^ree,  to  an  impro\"ement  in  efficiency. 
There  has  been  tlurin.L;  the  last  half-century  a  stead}- 
increase  in  the  a\'erai;e  amount  of  capitcd  necessary 
t(j  set  a  laborer  at  work  and,  at  the  same  time,  in 
the  amount  (^f  capital  neces>ar\-  to  produce  a  product 
of  a  L,d\'en  \"alue;  or,  to  put  the  same  fact  more  con- 
creteK',  an  increased  api)licatit)n  of  machiner\-  in 
})r()diiction.  The  conse([uence  is.  as  we  mi;j;ht  ex- 
pect, that  althoir^li  the  product  ot  indu^tr}-  has  in- 
creased, the  }M'()[^()rtion  of  the  pi'oduct  L;'<iini_^  to 
labor  has  diminished.  Absohite  wa.L;er^  m,i\'  liax'e 
inci'eased,  but  relatixe  \\  aL;\'s  ha\"e  dimijiis'ied.  It 
is  what  we  miL,dU  expect,  because  the  amount  of  the 


98  Tlic  Bargain  TJicory  of  Wages 


capital  in\-cstcd  has  increased  more  rapidly  than  the 
product.  If  we  take  the  wages  paid  in,  the  amount 
of  capital  inx'ested  in,  and  the  total  product  of,  the 
mechanical  and  manufacturing  industries  in  th-c 
United  States,  in  i860,  as  each  equivalent  to  100, 
Ave  find  that  in  1890  the  capital  invested  would  be 
represented  by  546  and  the  product  by  397  and  the 
wages  by  168. 

COMPARISON  OF  INDUSTRY  IN  1S60  AND  1890  IN  U.  S. 

CAPITAI,.                     PRODUCT.                       WAGES. 
1 860 100    100    ICG 

iSgo 546   397     168   ■ 

We  find  similar  results  in  the  development  of  in- 
dustry in  Canada,  though  we  cannot  carry  the  com- 
parison so  far  back. 

COMPARISON  OF  INDUSTRY  1S81  AND  1S91  IN  CANADA. 

CAPriAI..  PRODCCT.  WAGES. 

iS3r 100  100 100 

I89I 215  153  117 

The  following  tables  bring  out  the  same  results  in 
another  wav.  They  compare  the  amounts  of  capital 
emplo\'ed  to  produce  a  product  \-alued  at  S'OO-  'ind 
the  percentage  of  the  net  product.  /.  r. ,  cA  the 
product  minus  the  raw  material,  that  goes  to  labor. 


UNFFKn  STATFS. 

per(Knta(;e  of 

PKOIifCT  GOING 
TO   I.AI'.Dl^ 

IS50 $52.32  51 

1890 69.62  45 


CAPn  AI,  PER  $100 
OF  PKOOrCT. 


Increased  Output  and  Increased  Wages.         99 


CANADA.* 


CAI'IIAI.  I'Kli  SlOO 

OK  rKouri'T. 


I'KKrF.NTAr.K    OK 
TKODrCT    COING 

ro  !.Ai;oR. 

iSSi $53-"7    45-7 

i^'ji 74-3^)    45-7 

The  results  support  the  conclusion  wc  h;i\'c  alrcad)' 
drawn  from  the  coni[)arati\e  tables,  i;"i\en  on  p.  91, 
that  there  is  no  exact  i)arallelisni  between  the  ad- 
\'ance  of  waives  antl  the  increase  of  the  pr(  uluct.  1  he 
comparison  siiows  also,  however,  that,  in  spite  of  the 
increased  proportion  of  capital  em[)loyed,  the  rela- 
ti\'e  share  of  the  [)roduct  i^'oini;"  to  capital  has  not  in- 
creased, and  the  relati\-e  share  i;oin_o;  to  labor  has  not 
diminished  correspondini^h'.  Labor  has  been  able  to 
make  !_^ood  a  claim  to  a  laroc  part  of  this  increased 
product.  The  capital  necessar}-  to  produce  a  \'alue 
of  §100  has  increased  thirt\--three  per  cent,  in  the 
industr\-  of  the  iMiited  States,  but  the  share  L;<iin_L;  to 
labor  has  bee'U  diminished  b\-  a  little  more  than 
elex'cn  per  cent.  Thus  the  second  \'ersion  of  the  pro- 
tlucti\'ity  theor\'  is  inade([uate.  The  laborer's  contri- 
bution t(j  e\'er\-  SlOO  worth  of  product  has  ob\'iously 

*  I'hc  liL^uro  fur  Caiia^ia,  which  are  lal^cii  from  7'h,-  Statis:ical 
War  /)'.'(',{■  of  Canada,  i.sMit.-il  liy  the  I-'wmiiiiun  slat  i^iician,  are  '••pea 
to  the  -iispicion  of  partisan-hip.  'i'lic  Liberal  jiarty  in  Cana.la  lia> 
aI\\-a\->  ilerlareil  that  the  -eiti^n-'^f  the  cen-;is  of  i  s  ,1  .Icaliiii;-  \\i;li 
iiiihi-try  area  parli-an  (hH-iiment,  inten^icl  to  pri  .ve  tliat  tlie  National 
!'. 'lie}- ha- heen  a  L^rcat  siUTe--.  ( 'ana-la  i- ailinil 'e'lly  nm.  in.i;;-!rially 
a-  [x\  -lux-ei'pe'l  a-  the  riii:d  s;a:e-,  a;.'!  ii  ean  har-lly  he  llie  ca-e 
that  there  ha-  been  a  _<j;reater  ii-.-vea-e  i'l  <  ar.a^'.a  in  te:i  ye.ir-  tlian  in 
th.e  Cnitel  State-  in  \'-\\\-  \ear-  ;::  the  ani'-ttnt  nf  ea;  i':\l  !;cor--arv  to 
pr-iliue  a  i>r"ln.'t  worth  siO'.  Tile  am  'ant  -f  eatit;il  em  !  '.-e-l  to 
l'p"luee  a  or  "luei  ■  f  a  -i\en  wiliie  i-  a  -are  iniiieati' mi  of  \\\^  stage  of 
iii'hl-t!  ;a:    'h--.  eh  ii'liient. 


lOO  TJic  J^argain  Theory  of  JVagcs. 


fallen,  and  his  share  of  the  product  has  also  fallen, 
but  has  not  fallen  correspondinf^dy.  It  is  true  that 
the  laborer's  contribution-  to  a  given  product  does 
not  fall  in  the  same  degree  as  the  amount  of  capital 
is  increased.  The  intelligence  of  the  laborer  is  a  con- 
dition of  the  use  of  machinery.  The  laborer's  lack 
of  skill  and  general  intelligence  is  often  the  cause 
\vh}-  newer  and  more  elaborate  machinery  is  not  in- 
troduced ;  and  if  more  machinery  has  been  intro- 
duced it  must  have  been  because  the  higher  intelli- 
gence of  the  laborer  has  rendered  it  possible.  The 
increased  product,  therefore,  which  has  resulted 
from  the  greater  use  of  machinery  cannot  all  be 
attributed  to  the  increase  in  the  amount  of  capital 
employed.  IVat  the  intelligence  of  the  laborer  has 
not  improved  to  an  extent  sufficient  to  account  for 
the  fact  that  his  share  of  the  product  has  fallen  by 
onl\-  cK'X'en  per  cent.''-  The  contention  of  Mr.  Mal- 
loch's  Labor  and  tJic  Popular  Welfare,  "  that  labor 
is  no  more  producti\"C  to-day  than  it  v»-as  a  century 
ago,"  is  only  an  exaggeration  of  the  important  fact 
that  the  increased  productix'it}'  of  industry  is  not 
altogether  due  to  the  increased  intelligence  of  the 
working  classes. 

*  W'c  have  no  means  of  determining,  even  witli  apprfiximate  accu- 
racv,  tile  amnuiit  (if  the  increa-eil  ei>iitril)Uti(>n  df  tiie  lahorer  marie  when 
mai-iiinerv  i>  ein]  ■!<  i\e'l.  In  one  ca^e  \\  e  do  kin'W  that  all  of  the  in- 
crease of  ;he  iirMiluct,  due  entii'ely  to  lal)iir,  is  noi  handed  ()\er  tn  the 
lali'irer.  This  i-  the  ca-e  I'f  rmlit  SiiaiiiiL;.  ''  Ididei'  the  stimulus 
<if  I'riitit  Sh.arin^  the  \\-'.a-kers  mu-t  create  the  additional  profit-  lliey 
ai'c  to  re(C!\-e"  (Profe^^"!-  NichoKon,  Coitteuiporai-y  Ra-if-^'.  iS()'i,  ]). 
''.-):  Ivat  they  du  n.it  recei\e  the  whole  'A  the  ad.ditiunal  jtrol'it  they 
'jreate. 


The  EconoDiy  of  High  linages.  lOi 


Tlie  cause  of  tlic  fact  that  the  rchitivc  share  L^oini^ 
to  hibor  has  not  diminished  ])r()porti()nally  with  the 
increase  in  the  u.se  of  capitid  cannot  be  sini[)I}-  that 
the  total  picxhict  has  incieasech  The  total  product 
is  not  so  lar;;e,  even  after  all  the  increase  (jf  recent 
\-ears,  that  any  claimant,  through  satiet\-,  w  ill  aban- 
don part  of  the  share  he  could  obtain.  The  real 
reason  is  that  since  an  increased  use  of  machinery  is 
not  p('>ssible  without  the  acti\e  co-operation  of  labor, 
the  position  of  the  laborer  has  been  improvetl.  His 
bi'st  efforts  are  necessar\'  for  the  empl(j\anent  of  this 
incrc;ise(l  ca[)ital  and  to  call  these  forth  the  ca])itali->t 
has  been  compelled  to  offer  him  as  an  inducement  a 
larc^er  share  of  the  product  than  apparently  he  is 
entitled  to.  The  position  of  the  capitalist  has  been 
correspondini^l}'  \\'erd<;ened  by  this  necessity.  The 
producti\'it\'  theory,  in  one  \'ersion  or  the  other,  has 
attained  ^'cneral  acceptance  and  has  been  embodied 
in  a  practical  formula  rei;ardini';  the  cconomv^  in  hiL;'h 
\va;4i's.  Tliis  formula  is  m;ule  the  basis  of  the  en- 
liu^lUened  discussion  of  the  tariff  question  in  opposi- 
tion to  those  who.  ii4"norcUitl\',  raise  the  cry  of 
"  [)auper  laljoi', "  and  of  the  economic  discussion  of 
the  shortening'  of  the  w;)rkini;"  da\',  in  opposition  to 
those  mechanical  ideas  ot  labor  which  rei;ard  the 
laljorer  as  a  machine  wliich  must  necessarih-  produce 
twice  as  much  in  sixte^m  hours  as  in  eiid.it.  '1  lie 
econonu'  of  hi;.di  wa^',es  is  i)reached  as  a  L,'^os[)el  of 
hope  for  the  hd)orer  with,  possi'oly,  not  a  \'er}'  clear 
recoi;nition  of  tlu'  consecpience  tliat,  if  ihe  i^ospel  is 
true,    a   ^hortenini;  of  the   hours   of   labor  is   not    a 


102  TJic  Bargain  Theory  of  Wages. 


lessening  of  labor  and  an  increase  of  wages  per  unit 
of  time  may  even  mean  a  diminution  of  wages  per 
unit  of  effort;  and  there  is  both  surprise  and  indig- 
nation that  the  doctrine  should  ever  be,  or  have 
been,  called  in  question.  Yet  it  is  a  comparatively 
new  gospel  which  has,  within  thirty  years,  arisen  to 
supplant  the  depressing  doctrine  of  the  economy  of 
low  wages.  W'e  may  practically  date  the  new  theory 
from  the  early  fifties,  when,  to  the  immense  aston- 
ishment of  advocate  and  opponent  alike,  the  Factory 
Acts  did  not  ruin  English  industr}-,  but  inspired  it 
with  new  life.  The  accepted  doctrine,  down  to  the 
middle  of  the  century,  was  of  the  economy  of  low 
wages.  Even  those  who,  in  deference  to  Adam 
Smith,  had  accepted,  without  full  understanding,  a 
more  hopeful  doctrine,  rejected  incontinently  the 
practical  inference  that  a  shortening  of  the  hours  of 
labor  might  even  increase  productive  capacity. 
r^IcCulloch,  who  had  loyally  followed  Adam  Smith 
in  dcn}-ing  that  high  wages  encourage  dissipation 
and  idleness,  and  Senior,  who  made  the  first  antici- 
patory steps  away  from  the  Wages-Fund  Theory 
to  the  Productivity  Theor\',  were,  at  first  at  least, 
strenuous  oj)ponents  to  the  Factory  Acts.  It  was 
Senior  whose  "  last  hour  "  gave  the  ralh'ing  cry  to 
the  op[)oncnts  of  the  measure,  although  he,  like 
many  of  the  other  opponents  of  the  Factory  legis- 
lation, was  con\'erted  by  the  unexpected  effects  of 
the  Act  on  the  textile  industries. 

The  doctrine  of  the  economy  of  low  wages  was  a 
natural,  though   perhaps  not  a  necessary,  inference 


The  Eco)io)ny  of  Low  Wages.  103 


from  the  IMcrcaiUilc  theories  of  last  century,  as  it  is 
from  protectionist  theories  of  to-daw  It  is  siLiiiifi- 
caiit.  at  any  rate,  that  the  o\'ertlirow  of  Mt.-rcantilisin 
was  followed  b\'  the  cK'nionst r.ition  that  the  inference 
from  it  was  not  consistent  with  the  actual  experience. 
In  1S45  the  repeal  of  the  Corn  L;iws  marks  the  final 
overthrow  of  Mercantilism,  and  the  Ten  Hours  Law 
of  1S47  had  sucli  unexpected  roulls  in  stimulating;' 
intluslry  that  it  was  no  loii^-er  pos.->ible  to  hold  the 
purel\'  mechanical  idea  of  labor.  As  the  triumph  of 
free  trade  was  the  end  <jf  a  loni;'  process  of  chani^e 
and  con\'ersion,  so  the  practical  demonstration  b\' 
the  factory  act  was  all  that  was  nee(_led  to  complete 
that  chaiiL^e  of  views  which  bei^ins  with  Adam 
Smith's  enthusiastic  ad\'ocac\'  of  the  doctrine  that 
cheap  labor  and  low-priced  labor  are  not  necessarily 
s\-noin'mous.  Senior  and  Lord  Ih'asse\-,  howewr, 
were  the  first  to  show,  Ijy  means  of  extended  illus- 
trations and  statistics,  the  fallac\-  of  the  older  \iew. 
The\"  ilid  not,  it  is  true,  ad\"ance  the  modern  theor\' 
in  its  un([ua!ified  form.  They  suL^^oted  an  indiffer- 
ence theor\-  to  the  effect  that  it  did  not  matter  much 
to  the  emplo\'er  whether  he  paid  \\vj\\  way;es  to  effi- 
cient men  or  low  wai;"es  to  inefficient  men.  "  It  may 
be  supposed,"  sa\'s  Senior,  "that  the  price  of  labor 
is  e\-er\-where  and  at  all  times  the  same,"  ■'■  and  Lortl 
i)ras>e_\'  declares,  in  the  iiUrothiction  to  I'lireigii  Jl'i'r/c 
and  liiiglis/i    U'l/ges,    that    the   cost   of   work   <is  dis- 

*Scnii>r,  /'i'////,'.// AV,'//!'/^/!',  p.  i?i.  See  ri!-o  //vV.  for  quotation;- 
from  the  L-\i.leiu;e  nt'  Mc( '■allocli  licfoie  the  C'omniittec  on  Arti>ai!- 
anil  Machinery,  p.  144  ;7  Si\/. 


I04  TJic  Bargain  Theory  of  Wages. 


tinguishcd  from  the  daily  wage  of  the  laborer  is 
approximately  the  same  in  all  countries.  The  evi- 
dence on  which  Senior  and  Lord  Ikassey  rely  for 
this  doctrine  of  indifference  is  drawn  mainly  from 
manual  labor  and  their  theory  remains  practically 
true  so  far  as  manual  labor  is  concerned.  Some  of 
the  facts  and  figures  giveii  b}'  Lord  Brassey  do  in- 
deed su})port  the  more  advanced  doctrine  of  the 
economy  of  high  wages;  but  the  increased  efficiency 
Avhich  followed  each  extension  of  the  Factory  Acts 
is  the  real  cause  of  the  general  accej)tance  of  the 
modern  doctrine.  The  Factory  Acts  liad  been  ad- 
vocated as  a  moral  reform  and  justified  on  the 
ground  that  welfare,  not  wealth,  sh.ould  be  the  great 
object  of  go\'ernment.  The  economic  justification 
of  the  l''act(jry  Acts  probabh-  surprised  Lord 
Shaftesbury  as  much  as  it  confounded  Senior.  The 
abundant  economic  justification  of  the  principle  of 
the  .-\cts  forms  a  turning  point  in  wages  tlieory. 
Since  then  the  indifference  theory  has  become  the 
econom}-  of  high  wages;  and  the  docti'ine  has  been 
extended  to  co\-er  all  industry,  machine  industry  as 
well  as  manual  labor  in  whicli  machinery  is  not  much 
used.  Tile  facts  and  tlie  assumptions  of  the  tlieory 
have  Ijcen  .'dready  di-cu-sed  :  but  it  is  neccssar}'  to 
mention  one  other  consideration  that  is  of  great  im- 
portance. The  figures  which  are  adwmced  in  proof 
and  illustration  compare  only  labor  costs:  and  labor 
cost  without  machiner\-  is  a  different  thing  from 
labor  cost  with  machinery.  We  must  include  in  the 
leal  labor  cost  of  production  in  machine  industry  the 


ll'a'n-  Cost  aiiti  Labor  Cost. 


105 


cost  of  tlic  l;il)or-s,i\inL;  machine,  that  is,  the  ex- 
penses of  its  workiiiL;-.  and  the  contribution  to  the 
sinking'  fund  lu  rep!. ice  the  machine.  Machinery 
has  to  a  lar_L;"e  extent  reduced  the  nominal  hdjor  cost, 
but  statistics  wxw  hickini;'  to  sh(.)w  how  far  the  real 
and  compk'te  labor  ro^i  has  been  reduced.  If  it 
takes  uKu'e  cajiital  in  the  foi'm  (-f  niachinerx'  to  set 
each  \\'oi"ker  at  \\■or]^  in  one  cmnitry  than  in  ;Miother, 
there  ma\-  l)e  no  _L;i'ound  for  saxaiiL,''  that  the  hi^iier 
\\aL;-.s  in  the  hrst  are  connterbalanci-'.!  \)\  the  greater 
productix'ity  of  labor.  Tiie  lari^er  output  cannot  be 
a  measure  of  the  <^reater  efficienc)'  when  the  amf)unt 
of  capital  re(iuired  to  produce  SlOO  of  product  is  in- 
creased. ]-5rentano.  howex'er,  re<_;'ards  the  Rejiort  of 
the  Cicrman  Iron  In([uir\-  Commission  (1S791  as  halt- 
iuL^.  because  "  the  increasetl  capacity  of  ])roduction 
is  not  stated  to  be  the  exclusi\'e  cause  of  the  increase 
in  the  a\"erai;e  output  of  the  indi\'idual  workman."  " 
The  ach^ocates  of  the  econom\-  of  his^h  waL;'es  are 
not  all  read\-  to  jj^o  so  far  as  Ih'entano.  He  e\'en  de- 
clares that  the  policy  of  Lancashire  cotton  spinners 
and  wea\'ers  in  demandinc;  factor)-  IcLnslation  for 
Bomba}'  is  suicidal  ;  because  the  onl\'  reasonable  hope 
Lanca^hii'e  can  ha\'e  of  o\'erconiin^'  her  disabilit}-  of 
distance,  alike  from  the  cotton-fields  antl  from  a  larc^e 
])ortion  ot  her  mai'lcet,  is  in  the  economy  ot  hi_!_di 
\\'a;_^es  and  in  tlie  '^''reater  efticienc}'  which  lias  resulti'd 
in  I^n^Iand  from  factor\-  le;^-i-l;ition.  This  is  an  ex- 
treme positii>u  which  is  not  often  taken.  It  i>  ;_(ener- 
ally  reco;_;"ni/ed  that  in  some  eountries   ch.eapK-  {)aid 

*  nrcntaii'),  I/rios.    H'iI^ys,  atui  r'yoJuitioi,  p.  lO. 


io6  Tlie  Bargain  TJicory  of  Wages. 


labor  is  really  cheap  labor.  These  countries  are  not, 
it  is  true,  the  industrially  developed,  and  the  excep- 
tion might  be  neglected  were  it  not  that  the  exception 

is  claimed  to  exist  within  the  United  States.  There 
has  of  late  been  a  good  deal  of  discussion  regarding 
the  removal  of  the  textile  industries  to  the  South; 
and  the  organs  of  the  manufacturer  allege  that  the 
movement  is  away  from  the  trade-union  and  factory 
legislation  sphere  to  regions  where  help  is  cheap, 
really  cheap  as  well  as  nominally  cheap.  To  the 
contention  that  the  Southern  help  is  less  efficient, 
they  repl\-  that  it  is  not  correspondingly  less  efficient 
than  the  higher-paid  Northern  help. 

"  The  other  argument  by  which  tins  legislation  is 
defended  is  .  .  .  that  the  average  factory  labor  in 
Massachusetts  and  New  England  is  n:iore  intelligent  than 
in  other  sections  of  the  country,  tlie  South  particularly, 
and  can  accomplish  more  and  better  results  in  shorter 
hours.  As  between  reasoiiable  and  unreasonable  hours 
there  is  validity  to  tliis  argument  ;  but  as  between  fifty- 
eiglit  and  sixtv  liours  a  week  it  lias  no  validitv  whatever. 
What  we  have  just  said  relative  to  the  soeed  of  machin- 
ery is  a  comjilete  answer  {sec  above,  p.  93).  The  state- 
ment about  the  relative  intelligence  and  skill  of  New 
Ibigland  operatives  is  not  seriouslv  put  forth  In'  persons 
familinr  with  the  ])resent  status  of  fact(^)ry  labor  in  the 
East.  The  bulk  of  that  labor  is  foreign-horn  ;  its  aver- 
age intelligence  is  not  higher  tlian  the  a\'erage  intelli- 
gi/nce  of  similar  labor  in  otlier  States,  nor  so  high  as 
lliat  in  inan_\-  other  sections  of   the  conntr\-.''  * 

*  lUillit'ni  (>/  tki    Xational  Association  of   Wool  MiDiufactntcrs, 

pp.   263,   2()i). 


TJic  licoiio)ny  of  Lolo  Jl'ti^i^fS.  107 

There  is  therefore  more  io  be  saitl  for  the  indiffer- 
ence theory  or  even  for  the  economy  of  low  wattes 
tlian  is  _i;enerall\-  achnitlecl.  The  economy  of  hi_L;h 
waj^^es  must  be  relati\-e  to  man\'  coniHtions  :  to  the 
existini;^  standard  of  comfort  and  the  possibiht\-  of 
raisin^'  it;  to  the  effect  of  a  rise  in  tlie  stamhu'd  of 
lite  on  elficienc}';  to  the  existent  skill  and  intelli- 
L^ence  of  the  workers;  and  to  the  extent  to  which 
machiner\-  is  emi)lo}-ed. 

The  extreme  to  which  l^rentano  has  carried  the 
doctrine  is  all  the  more  remarkal)le  that  he  has  him- 
self suL;s4'ested  the  [)ossibility  of  reconcilinL;'  these 
diverse  \'iews,  whether  re!_;"arded  as  historically  suc- 
cessi\'e  \'ieus,  or  as  presently  opposed  opinions. 
He  admits  that  the  econom\-  of  low  wa^es  is  true 
not  onl\'  of  the  se\'L'nteenth-  and  eii;iiteenth-century 
workers  whom  Child  and  I'etty  and  other  writers 
had  before  their  minds  when  they  wrote,  and  of 
workers  in  the  I'last,  but  also  of  laborers  in  the  back- 
ward couiitr)'  ilistricts  of  Cei'many;  but  for  all 
countries  and  districts  which  ha\'e  come  under  the 
inlluence  of  competition  and  pr(\L;"ressi\-e  ideas  the 
econ(^m\'  o\  hl'j^h  wa<.;"es  is  the'  law.  The  reason  for 
this  distinction  is  the  difference  in  the  attitude  of 
the  men  towards  industr\-.  The  eiL;hteenth-centur\- 
woi'kei's  li\ed  and  worked  under  the  inlluence  of  cus- 
tom and  tradition.  This  is  true  also  of  the  worker 
in  backward  countries  and  districts.  1  lis  stanel- 
ard  of  life  and  his  st.mdard  of  elTiciencx"  are  alike 
deterniined  for  jiini.  d"o  I'ai^e  hi-<  wa^'es  would  ha\'e 
no  effect  on  his  ellicienc\'  unless  it  were  for  the  time 


lo8  The  Bargain  TJicory  of  Wages. 


being  to  lo\\cr  it.  To  attempt  to  raise  the  standard 
of  his  efficiency  is  to  attempt  the  impossible.  But 
the  worker  of  tlie  present  da)-  is,  to  a  very  kirge  de- 
gree, intluenced  by  the  economic  motive;  and  the 
economy  of  higli  wages  is  the  consecpience.  The 
change  from  an  economy  of  low  wages  to  an  economy 
of  high  wages  was  brought  about  by  the  economic 
awakening  of  the  worker.  This  awakening  may  be 
due  either  to  migration,  to  new  industrial  conditions, 
or  to  a  change  of  the  conditions  in  \\hich  the  worker 
lives.  Brcntano  (juotes  Doctor  Johns(jn  with  ap- 
pro\-al :  "  Established  custom  is  not  easil\-  broken 
till  some  great  e\'ent  shakes  the  whole  system  of 
things  and  life  seems  to  recommence  on  new  princi- 
ples." The  influence  of  migration  on  hibor  we  con- 
sider later,  but  the  same  result  may  be  effected  in 
the  history  of  a  people  by  industrial  clianges  as  are 
effected  in  the  history  of  an  indi\'idual  by  migration 
or  emigration.  The  introduction  of  the  factory  sys- 
tem made  this  change,  first  in  England,  and  then  in 
America,  and  then  on  the  continent  of  Europe.  It 
created  competition  among  the  producers.  The  old 
system  of  autonomous  production  for  a  local  market 
gave  little  motive  for  exertion.  When,  howe\'er, 
large  amounts  of  capital  were  sunk  in  buildings  and 
maclnner}',  the  employer,  anxious  for  the  largest 
profit,  and  hating  to  see  his  capital  idle,  dro^e  his 
workmen,  with  the  residt  of  the  hideous  excesses 
which  it  was  necessar\-  to  call  in  legislati(.)n  to  re- 
move and  to  ])re\'ent.  When  one  a\"enue  was  closed, 
the   emplo\'ers   sought    another.       They    could    not 


TJic  Dy}iaviic  Principle.  109 

Icnf^tlicn  the  workin;^  tla\-,  so  they  endea\'ored  to 
increase  tlie  intensity  of  working;' and  in  their  anxiety 
for  profit  offered  inchicenients  to  kihor  to  exert  itself. 
Labor  could  he  induced  to  do  what  leLjislation  for- 
bade it  ^houlil  be  compelled  and  dri\-en  to  do.  A 
powerful  new  inoti\'e  came  into  existence.  The 
laborer  could  be  induced  to  exert  himself  b\'  an  ap- 
peal t(T  his  self-interest,  and  tiie  econom)-  of  hii,di 
wa_i:^es  became  an  industrial  fact. 

Reference  lias  alread)'  been  inade,  in  discussing 
the  two  earlier  theories,  to  the  attempts  made,  in 
varit)us  wax's,  to  secure  some  necessary  dynamic 
principle;  and  throughout  the  whole  treatment  of 
problems  of  distribution  there  is  an  e\'i(lent  search 
for  some  detin'minant  (juantit},"  b\'  reference  to  which 
we  may  determine  the  other  shares  of  the  product. 
The  distribution  of  the  ])roduct  of  industi'}- — the 
National  I)i\-idend — seems  in  practice  so  definite 
and,  notwithstanding  strikes  and  kindred  social  (and 
inisociali  phenomena,  so  deliberately  certain  that  it 
seems  almost  a  foregone  conclusion  that  there  should 
be  some  single  princi[)le  disco\'erable,  in  virtue  of 
which  this  precision  exists.  Wdien,  liowe\'er,  we 
set  ourseh'es  to  judge  between  th.ree  or  four  actual 
ckiimants  for  the  product,  the  ])roblem  becomes 
])erp!exing  and,  apparenth".  in  ]M-inciple,  insoluble, 
unle>s  \ve  can  ajipnrtion  to  'Mie  oi'  other,  or  more 
than  oiU',  nf  the  claimants  a  definite  share  as  b\' 
nece->>it\-.  We,  therefi  >rt;.  naturalU'  look  f<>r  some 
giwn  (juantit\-  or  ([uaiitities  which  will  enable  us  to 
soKe   the-  remaiiulea-  of   our  iirublem.      The   mathe- 


I  lo  T]ic  Bargain  TJieory  of  Wages. 


matical  method,  however  valuable  it  may  be  for 
illustration  and  exposition,  is  not  quite  applicable, 
because  here  we  are  dealing,  not  with  rigid  quanti- 
ties, but  with  human  forces.  Economists  in  their 
treatment  of  distribution  have  generally  anticipated, 
or  adopted,  the  spirit  and  the  purpose  of  Mill's 
Logic  anci  applied  the  methods  of  physical  science 
to  their  investigation  of  the  social  problems  of  dis- 
tribution. The  Method  of  Residues  seems  to  lend 
itself  most  rcadih'  to  the  accomplishment  of  this 
particular  purpose;  and  various  attempts  have  been 
made  to  demonstrate  that  some  particular  share  in 
distribution  is  residual,  i.  c\,  that  the  product,  de- 
duction being  made  of  certain  fixed  payments,  be- 
longs, by  necessit}'  and  by  right,  to  one  or  other  of 
the  claimants.  Physical  methods  are  more  or  less 
inadequate  to  deal  with  human  facts  and  forces  and 
the  result  of  their  use  has  generally  been  to  give 
to  some  element  an  unnatural  rigidity,  ^\'e  have 
need  in  economics,  as  well  as  in  metaphysics,  of  the 
Kantian  category  of  reciprocity. 

The  best-known,  and  most  generally  accepted, 
a})plication  of  the  Method  of  Residues  in  economic 
science  is  found  in  tlie  classical  theor\'  of  rent. 
Rent  is  the  surplus  of  the  product  remaining  after 
the  expenses  of  production,  that  is,  the  wages  and 
tlie  profits,  have  been  deducted.  Land  on  the 
margin  of  cultivation  pa_\-s  no  rent  because  it  yields 
no  sui'plus,  no  residue  after  the  expenses  of  produc- 
tion ha\'e  hccn  met.  There  is  a  strong  tendenc}',  at 
present,  to  extend  the  area  of  the  conception  of  rent 


The  Residual  Method. 


1 1 1 


antl  apply  the  tci'iii  not  only  to  llic  residue  of  the 
total  product,  hut  also  l)_\-  aii;iloL;\'  to  an\'  returns  to 
lahor  and  capital  which  excrrd  the  normal  return  to 
such  labor  and  capital.  'I"he  \-alidit}'  of  residual 
process,  in  the  ori^dnal  case  of  rent,  de[)ends  ob\-i- 
ously  on  the  tiaith  of  the  assumption,  that  the  re- 
turns to  ca[)ital  and  labor  are  fixed  ([uantities.  If 
these  are  variable — and  the  extension  of  the  concep- 
tion of  econ.omic  rent  or  surplus  seems  to  indicate  that 
the\-  are  \"ai'iable  in  some  di'i^'rec:  — the  perplexities 
of  the  problem  of  distribution  are  resoK'cd  oid\'  in 
name,  and  the  residual  nature  of  Rent  is  purelv 
formal.  To  Ricardo,  it  \\as  an  easy  conclusion  that 
Rent  was  a  residual  share.  Xotwithstandini;"  his 
distinction  between  natui'al  and  market  waives  and 
his  concession  that  market  \\'a^'es  miL;ht  remain  con- 
stanth'  and  for  an  indefinite  period  al)o\'e  the  natural 
rate,  when  he  turned  t(~)  the  consideration  of  the  other 
shares  of  the  pi'oduct  he  seemed  to  thiidv  of  natural 
waL;es  alo!K',  which  \\'ere  fixed  at  the  amount  "  neces- 
sar)-  to  enal)le  the  laborers,  one  with  another,  to 
subsi>t  and  to  [)ei'[)etuate  their  race,  without  either 
increase  or  diminution."  I'l'ofits,  howe\"er,  are  not 
reg^arded  as  cpiite  so  definiti'l}-  determined.  The 
theory  of  profits  and  intere-^t  h.id  not  in  Ricartlo's 
hands  a--sumed  the  m.-at  concise  form  it  recei\'ed 
from  later  economi:-ts.  Ricardo  had  failed  C(")n- 
sistentl)'  to  state  a  distinction,  which  lu:  sonietimes 
reco^^ni/ed.  l)et ween  tlu-  i^ro-^s  amount  of  profits  and 
profits  per  cent.  ;  an.d  the  re-^ult  was  a  reckless  use 
of  th.e  proposition  that  way^es  could  rise  only  at  the 


112  The  Bargain  Theory  of  Wages. 


expense  of  profits.  Later  writers  developed  more 
clearly  the  notion  of  a  necessary  rate  of  profits.  A 
certain  rate  of  profit  was  necessary  to  call  out  an 
effective  desire  to  accumulate  in  the  requisite  degree. 
But  v>'e  can  hardly  say  that  Ricardo  put  forward  a 
natural  rate  of  profits  as  he  had  put  forward  a  natural 
rate  of  wages.  Rather  did  he  consider  inconsistently 
])rofits  as  also  being  a  residual  share.  Wages  could 
rise  only  at  the  expense  of  profit.  Consequently  we 
do  not  look  to  Ricardo  for  the  standard  exposition 
of  the  Ricardian  theory  of  rent.  In  his  exposition, 
rent  was  a  surplus  remaining  over  after  one  deter- 
minate and  one  indeterminate  share  had  been  paid 
out  of  the  product. 

The  neat  formula  of  Rent  as  equivalent  to  the 
product  minus  the  expenses  of  production — R  = 
(P  —  R) — was  not  presented  by  economists  till  the 
rise  of  the  class  of  simple  iiu'estors,  ^\■ho  required  a 
fixed  rate  of  interest  as  a  reward  for  abstinence,  to 
induce  them  to  postpone  immediate  enjo\-ment  to 
the  necessar\-  extent,  had  made  it  possible  to  regard 
profits,  dcfinitclx'  and  consistent!}",  as  a  fixed  share. 
Tlie  Ricardian  doctrine  of  fixed  \\ages  had,  in  the 
meantime,  Ijeen  abandoned,  but  its  place  was  taken 
In-  the  Wages-Fund  Tlieory,  wliich  made  \vages  as 
definite  and  determinate  as  tlie}-  were  under  Ri- 
cardo's  theor\\  Profits  \\'ere  tluis  a  determinate 
amount  and  wages  were  a  determinate  amount  and 
the  residual  nature  of  rent  was  tlius  neatly  estab- 
lished. Whih;  the  Wages-Fund  Theory  was  main- 
tained, this  was  the  current  the(>r\-  of  distributir)n. 


Rent  as  Residual. 


113 


It  was  based  011  the  twc^  assumptions  that  profits 
tended  to  a  miniimim  (fixed  at  the  rate  necessar\-  to 
call  forth  the  re([uisite  deL^t'ee  of  abstinciicej  and  the 
determination  of  the  wa:_,rcs  fund  by  the  intention  of 
the  capital.  The  theory  was  not  firnih"  established 
before  its  stability  was  threatened.  ?vlill  modified 
the  assumption  of  the  tendency  of  profits  to  an 
equality.  His  "  instability  of  unequal  profits  "  does 
not  afford  the  same  stable  basis  for  the  theory  of 
rent ;  but  the  residual  character  was  maintained 
until  the  Washes- l'\md  Theor}-  was  abandoned,  and 
is,  indeed,  still  maintained. 

The  residual  nature  of  prc^fits,  which  docs  not,  to 
the  ordinary  business  mind,  seem  to  require  demon- 
stration, has,  except  in  Ricardo's  half-hearted  fash- 
ion, hardh'  been  put  forward ;  but  the  residual 
character  of  the  reward  of  labor  is  part  of  the  current 
modern  theor\-  of  distribution.  Professor  Walker, 
after  demonstratiuL!,-  that  waives  arc  not  paid  out  of 
a  pre-accumulatetl  fund,  but  out  of  the  product,  de- 
clares that  \\":ig'es,  in  a  \-er\'  real  sense,  are  not  paid 
out  at  all,  but  ai'c  what  remains  o\'er  after  certain 
{\^c<\  charL;'es.  rents,  profits,  and  interest,  ha\'e  been 
met.  Rent  is  determined  by  the  mar^'in  of  cultiva- 
ti(Mi,  the  lands  wlrich  \-ield  no  rent;  and  i)rofits  and 
interest  are  similarly  and  anal()t;(iusl\'  determined 
!)}•  tlie  margin  which  just  c;i\'es  a  return  sufficient  to 
co\'er  expc'iiiu't ure. 

1  lie  dewlopiuent  of  a  re>idu.tl  iheorx'  of  waives 
was  a  natur.il  outcome  ot  the  attitude  ot  economists 
towards  economic  histor\-.      The\-  p^ersisteLJ  in  seeinc^ 


1 14  TJic  Bargain  TJicory  of  Wages. 


in  the  past  only  a  series  of  ready-made  illustrations 
of  the  theories  of  the  present ;  and  when  such  illus- 
trations were  harder  to  find  than  usual,  or  not  so 
clearly  illustrative  of  the  theory  in  hand  as  might  be 
desired,  they  did  not  hesitate  to  invent  a  purely  fic- 
titious economic  history  and  treat  it  as  sober  fact. 
They  always  assumed  that  the  principles  which  gov- 
ern men's  conduct  at  our  present  stage  of  industrial 
development  are  but  more  complicated  forms  of  the 
principles  which  governed  the  primitive  man ;  and 
regarded  it  as  at  once  a  necessity  and  a  virtue  to 
turn  to  the  early  instances  to  bring  these  principles 
into  clear  relief.  The  hired  laborer  \\\\o  receives,  at 
the  hand  of  another,  a  derivative,  not  an  original, 
share  of  the  product  is,  from  this  point  of  view,  re- 
garded as  in  the  same  position  as  the  original  auton- 
omous producer  who  was  the  final  owner  of  all  the 
fruits  of  his  labor  and  exertion.  Adam  Smith, 
although  he  did  not  in  terms  commit  himself  to  this 
view  of  history,  apparently  lends  to  it  the  sanction 
of  his  authority : 

"The  ])roduce  of  labor  constitutes  the  natural  recom- 
pense or  wages  of  labor.  In  that  original  state  of  tilings 
which  ])rere(les  both  the  ai>i)roi)riation  of  hind  and  the 
accumulation  of  stock  the  wliolc  produce  of  the  labor 
belongs  to  the  laborer.  He  lias  neither  landhjrd  nor 
master  to  share  with   liini."  •' 

Here  we  ha\'e  the  basis  of  the  residual  theory  and 

*  //'(/////  ('_/  Xdfioiis,  ]).  27.  See  Mr.  Caiman's  ProJuition  ami 
Dis/ri/iulh'ii ,  jij).  2(X),  20!. 


JTa^^'-cs  (IS  Risidnal.  1 1  5 

a  reason  for  rcjcclini;  a  tlicor)-  of  waj^cs  which  finds 
the  measure  of  waives  in  the  intention  of  tlie  em- 
j)loycr.  What  we  ha\-e  really  to  explain  is  not  wh)' 
the  laborer  receives  \\a<;"es,  but  why  the  whole  of  the 
product  of  industr\-  does  not  bclouL;'  to  him.  I'he 
explanation  is  that  as  industr\'  dexelojjs,  the  laborer 
comes  to  recpiire  more  and  more  the  co-operation  of 
agents  of  production  which  are  not  in  his  possession  ; 
and  for  the  help  of  these  he  is  compelled  to  pay. 
The  price  he  pa\'s  for  their  co-operation  must  be 
deducted  froni  the  resultant  product  before  we  ha\'e 
the  actual,  as  distinguished  from  the  natural,  recom- 
pense or  wages  of  labor. 

Adam  Smith's  suggestion  that  -wages  might  be 
regarded  as  the  residual  share  of  the  product  was  not 
de\'eloped  b}'  his  immediate  successors;  but  it  has 
been  taken  up  and  amplified  as  the  basis  of  the 
motlern  theoi'\"  of  wages.  This  i'e\'i\-al  of  a  neglected 
tloctrine  is  part]\"  due  to  the  gi'owth  of  tlemocrac\- 
and  the  conse((uent  tentlencx"  to  exaggerate  the  in- 
dependence and  supremac}'  of  the  working  classes  in 
the  labor  market  :  but,  mainl\-,  t<i  the  recognition  of 
the  fact  that  it  is  necessar\-  to  gi\-e  determining 
power  to  the  principle  of  which  the  law  of  wages  is 
the  expression.  The  earl\'  theoi'ies  endea\'ored  to 
tlo  so  directlw  The  Subsistence  T!ieor\-  ])ro\'ides 
a  minimum  below-  which  wages  cannot  fall,  and  the 
\\'age---l'"und  Theory  treats  the  sup])h'  of  lalxM'  and 
the  di-mand  for  lal)or  as  detlnite  ciUcUUities  fixed  b\- 
extraneous  foi'ces,  iia'es])ect i\e  and  independent  of 
each  ()ther.      Professor  W'cdl-cer  apiJroaches  the  prob- 


1 1 6  TJie  Bargain  Theory  of  Wages, 


lem  in  a  more  roundabout  way.  He  was  practically- 
debarred  by  his  polemic  against  the  methods  of  the 
Wages-Fund  Theory  from  attempting  a  direct  solu- 
tion ;  and  he,  therefore,  tried  to  show,  not  that  the 
share  of  labor  was  determinate,  but  that  the  other 
shares  taken  from  the  given  product  were.  Thus, 
by  the  method  of  residues,  the  end  at  which  the 
earlier  theories  had  aimed  is  reached.  The  share  of 
labor  is  determined  and  the  result  can  be  set  forth 
in  a  neat  but  unconvincing  formula  which  has  pro- 
voked Mr.  Gunton's  sarcastic  definition  of  the  small 
boy's  catch,  as  all  the  fish  in  the  sea  minus  those  he 
didn't  catch.  The  value  of  a  residual  theory  de- 
pends on  a  demonstration  of  the  strictness  of  the 
determination  of  the  other  shares;  and  this  demon- 
stration no  one  can  imagine  that  Professor  Walker 
has  provided.  In  other  chapters  we  find  him  a  (de- 
velopcdj  Ricardian  of  the  Ricardians  determining 
rent  as  a  residual  share,  and  profits  as  a  residual 
share,  and  interest  as  a  residual  share.  So  when 
we  find  that  wages  also  are  determined  as  a  residual 
share  we  can  hardly  avoid  the  inference  tliat  we 
are  tra\-elling  in  a  vicious  circle,  not  of  a  very  great 
diameter. 

The  Productivity  Thcor}'  is  held  b\-  many  writers 
who  do  not  adopt  it  in  its  residual  character.  These 
writers  are  inainly  concerned  v.'ith  tlie  practical  ap- 
plications of  the  thcor}-,  in  tlie  discussion  of  tariff 
reform,  and  of  the  reduction  of  tlie  liours  of  labor; 
and  for  their  purposes  the  residual  nature  of  the 
share  of  the  product  which  goes  to  labor  is  probably 


ll'an's  as  Residual. 


117 


better  left  in  the  backi^rouiul.  No  usi.'ful  purpose, 
at  aiu'  rate,  could  bu  serx'ed  by  treatin<^^  the  share  of 
labor  as  residual. 

Apart  from  the  [)ractieal  applications,  it  was  almost 
inex'itable  that  an  effort  should  be  made  to  show  that 
\va;^es  was  the  residual  sh.u'e.  The  final  test  (jf  a 
theory  of  waives  is  held  to  be  the  cUuiamic  force  of 
the  determiniiiL;  principle,  and  directl\\  the  produc- 
ti\'ity  theor\-  docs  not  provide  such  a  principle.  The 
total  product  of  industry  cannot,  in  any  intellic^ible 
.sense,  pro\'ide  a  measure  of  waives  because  the  whole 
cannot  be  a  measure  of  tlie  part.  That  out  of  a 
larger  product  larger  wages  can  be  paid  and  out  of  a 
smaller  product  lower  wages  is  not  e\'en  a  statement 
of  a  formal  truth  and  ma\'  be  a  statement  that  is 
untrue.  In  the  language  of  formal  logic,  a  defini- 
tion of  w;igcs  must  consist  of  a  statement  of  a  genus 
and  ;i  difference.  Where  the  genus  is  indisputably 
established  we  still  retpiire  the  statement  of  the 
tlifferencc.  The  theor\-  (A  wag^cs  <iught  to  state 
the  dilferentialing  principle  which  separates  the  part 
from  the  whole  of  wiiich  it  is  a  part.  The  Produc- 
tivity '1  heory,  at  the  ilrst.  and  in  many  expositions 
to  the  \'er\-  last,  is  merely  a  statement  of  the  genus, 
and  omits  all  rcfei"ence  to  tlu'  difference  as  some- 
thing (T  ci)mpai-ati\-el\-  little  imp'M'tance.  W'liile 
the  lU'w  tlieor\-  was  merely  a  pi)!emic  again-^t  the 
\\'age--l'und  Theor}-,  which  was  e's.-;entiall_\-  a  the()ry 
of  the  ^^lurce  from  which  wages  'aw  ]kul1,  it  was  suf- 
ficient ti)  pro\-e  that  wages  were  [\iid  from  another 
source.      Ihit   the  wasjes  fund   v\'as  determinate  and 


Ii8  TJie  Bargain  TJicory  of  Wages, 


predetermined,  while  the  new  source  is  also  the 
source  from  which  Rent  and  Profits  and  Interest 
are  paid.  The  triumph  of  the  new  theory  brought 
prominently  forward  the  question  of  the  measure  of 
wages.  The  treatment  of  the  subject  at  Professor 
Walker's  hands  indicates  the  progress  towards  the 
recognition  of  this  necessity.  TIlc  Wages  Question 
contains  no  hint  of  the  residual  character  of  the  share 
that  goes  to  labor.  Space  and  attention  are  devoted 
to  the  criticism  of  the  Wages-Fund  Theory.  In  his 
Political  Ecoiouiy,  the  WagesT^^und  Theory,  and  the 
polemic  against  it,  are  relegated  to  what  is  practi- 
call}'  an  aj)pendix,  while  the  residual  nature  of  the 
laborer's  share  of  the  product  is  full}'  set  forth. 

The  method  of  residues  was  employed  to  accom- 
plish indirectly  what  other  theories  had  professed  to 
do  directly;  but  the  final  result,  in  both  cases,  is 
practically  the  saine.  The  share  of  the  profit  which 
goes  to  labor  cannot  be  shown  either  directly  or  in- 
directly to  be  a  determined  amount,  and  the  de- 
structi\'e  criticism  to  which  each  successi\'e  attempt 
has  been  subjected  leads  us  to  the  conclusion  that 
the  need  for  absolute  determination  in  the  theor}-  of 
wages  is  illusory.  The  necessit}'  seems  to  arise 
from  the  fact  that  the  actual  shares  of  the  pr(jduct 
are  distinctly  determinate;  but  it  does  not  f(jlIow 
that  the.-;e  shares  are  predetermined  b\'  action  of  any 
one  princijjle.  Indeed,  a  re\'ie\v  of  the  phenomena 
of  distribution  shows  us  that  there  is  !io  definite  law, 
in  accordance  with  which  just  so  much,  and  no 
more,  is  ;i.ssigned  to  any  one  of  the  claimants.      The 


TJic  Coitribittioii  of  Labor  to  Prodiictio)i.      1 19 

shares  arc  nuituall}-  tlctcrniinctl  and  dctcrmininf^, 
and  the  result  of  this  process  can  be  known  onl\-  ex 
post  facto.  There  is  no  inherent  necessit}'  that  the 
share  of  labor  should  be  what  it  i>  ;  and  it  is  what 
it  is  in  x'irtue  not  onl)-  of  the  streni^'lh  of  labor  but 
also  of  the  streni;th  or  weakness  of  the  rival  claim- 
ants. We  must  i;ct  rid  alto;4ether  of  the  idea  that 
there  is  an  economic  foi'ce  which  allots  absolutel)' 
an\-  share  of  the  [)rt)duct,  ex'en  the  smallest,  to  ;iny 
of  the  chumants.  There  is  no  absolute  minimum 
and  no  absolute  maximum  for  an\-  share;  and  the 
amount  at  which  the  share  is  hnalK'  fixed  is  deter- 
mined b}'  a  combination  of  forces. 

There  is  something;  superhcially  attractive  in  the 
idea  on  \\hich  the  Productixity  I'heory  is  ultimately 
based,  that  each  factor  th.at  has  been  emplo}'ed  in 
production  should  obtain  as  a  return  what  it  has 
C(^ntributed ;  but  the  process  of  determinini^'  what 
each  has  contributed  is  ne-ither  so  eas\'  nor  so  con- 
clusi\-e  in  its  results  as  this  sui^'^'estion  makes  it  ap- 
pear, before  the  proljlcm  of  tlisco\-erini;  the  con- 
tribution made  b\'  each  factc^r  can  e\'en  be  a[)proached 
we  must  settle  \\\\a\  the  nature  of  the  contribution 
made  b\-  each  factor  is.  Is  it  a  physical  contribution 
or  an  economic  contribution  on  account  of  which  the 
TL'turn  is  t(_)  be  made  '■!  The  ])ln'sical  c^Mitributinn  uf 
each  factor  is  no  doubt  drlci'minato,  and  n'ii;^Tt,  b\' 
analysis,  be  tletermined  :  but  it  is  nbxaous  that  the 
ph_\"sical  Contribution  made  to  the  pi'oduct  is  neither 
explanation  nor  just ificat ion  ol  the  actual  remunera- 
tion rccc-i\ed,  .md   cannot   be  treated  as  such  unless 


I20  Tlic  Bargain  Theory  of  Wages. 


we  assume  that  the  whole  system  of  society  is  a 
monstrous  iniquity.  Tliere  are  factors  in  the  physi- 
cal process  of  production  which  are  necessary  and 
indispensable  (and,  as  '\l{\\  reminds  us,  there  are  ho 
degrees  of  indispensability)  which  yet  receix-e  abso- 
lutely no  share,  even  the  smallest,  of  the  product. 
The  contribution  to  the  process  of  production  made 
by  what  wc  call  the  free  gifts  of  nature  is  as  real  and 
as  distinct  and  determinable  as  the  contribution 
made  by  labor  or  by  capital,  but  no  share  of  the 
product  is  allotted  to  them ;  and  indeed  it  seems 
ridiculous  to  speak  of  a  share  of  the  product  in  this 
connection.  In  the  degree  in  which  any  agent  of 
production  approximates  to  the  character  of  a  free 
gift  of  nature,  however  necessary  it  may  be,  and 
may  continue  to  be,  to  production,  does  its  share  in 
the  product  decline.  It  may  continue  as  important 
as  before,  and  it  is  even  possible,  as  it  comes  more 
to  resemble  a  free  gift  of  nature,  that  its  physical 
contribution  may  increase  ;  but  its  reward  will  dimin- 
ish at  least  relati\'ely.  If  the  supply  of  labor  should 
be  increased  enormously  we  might  find  that  many 
operations,  prex'iousl}-  performed  by  machinery, 
could  be  more  profitably  performed  by  hand  (the 
converse  case  is  a  matter  of  common  industrial  ex- 
perience). Tlie  plu'sical  contribution  of  labor  to 
the  product  would  thus  be  augmented  ;  but  \\'hile 
the  total  reward  of  labor  might  be  increased  the 
marginal  reward  wr)uld  certainly  decrease.  The 
accumulation  of  capital,  again,  might  be  so  rapid 
and  so  enormous  that  the  rate  of  interest  mi^rht  fall 


TJic  Physical  Contribution.  12 1 


almost  to  zero;  but  the  application  of  capital  in  pro- 
duction would  increase  rather  than  diminish.  The 
skill  and  L^eneral  mental  qualities  necessar}'  for  suc- 
cessfid  manai;ement  might,  by  the  s[)read  of  educa- 
tion, become  \-ery  common  ;  but  management  would 
be  wo  less  indispensable  and  might  even  be  employed 
to  a  greater  extent  in  production  than  it  is  at  pres- 
ent; }-et  the  wages  of  su[)erintendence  would  fall 
off  as  the}-  ha\-e  done,  according  to  Mrs.  Sidney 
Webb,  in  the  textile  factories  of  Lancashire. 
Thus,  even  supi)osing  it  was  an  easier  matter  than 
it  is  to  determine  the  physical  contribution  made  by 
each  agent  to  the  prod  net,  wc  are  evidently  not  very 
far  ad\"anced  on  our  wa}'  to  determine,  according  to 
this  principle  of  justice  (which  makes  all  the  present 
organization  of  societ}-  a  monstrous  injustice)  what 
share  of  the  i)roduct  should  be  allotted  to  each 
agent. 

The  product  of  industry,  moreover,  is  not  the  re- 
sult of  the  se\-eral  factors,  but  of  the  combination 
and  co-o[)eration  of  the  factors.  Outside  of  the 
C'lml^ination,  and  apart  from  the  co-operation,  of 
tlie  \'arious  factors,  the  product  of  industry  would 
be  \'er\-  small.  The  factors  working  separateh',  and 
in  isolation  (and  se})aratel\-  and  in  isolation  some 
of  them  could  n()t  work  at  alh.  u-ould  onl\-  be  able 
to  turn  out  a  j)roduct  beggarl}'  in  comparison  with 
the  share  of  the  product  tlie\'  actually  receive  from 
the  re-^ults  of  co-opei"ation.  Capital  is,  at  the  best, 
only  a  })as^ive  instrumeiit  of  p,r(Hluction  :  without 
labor  and  opportunit\-  it  can  produce  nothing;  and 


122  The  Bargai)i  Theory  of  Wages. 


the  socialists  clamor,  in  virtue  of  this  principle  of 
justice,  that  it  should  receive  nothing.  The  earth 
might  yield  her  increase  without  labor  and  without 
capital,  but  the  amount  would  be  very  small  and  the 
quality  would  soon  deteriorate.  Labor,  the  pe- 
culiarly active  agent  in  production,  would  indeed 
produce  something;  but  the  progress  of  industry 
has  been  due  to  an  increasing  co-operation  of  labor 
and  capital,  and  other  agents  of  production;  and 
the  greater  the  co-operation  the  larger  the  product. 
\\'e  cannot,  therefore,  find  the  contribution  of  any 
given  agent  by  comparing  the  amount  of  the  product 
when  it  is  present  and  the  amount  of  the  product 
when  it  is  absent  and  calling  the  difference  between 
them  the  contribution  of  the  gi\-en  factor.  By  this 
method  we  should  obtain  some  rather  astonishing 
results.  If  labor,  in  the  absence  of  capital,  could 
produce  only  one  half,  or  one  third,  of  what  is  pro- 
duced to-day  when  labor  and  cai)ital  co-operate, 
fifty  per  cent,  or  sixty-six  per  cent,  ^vould,  on  this 
method,  be  assignable  to  capital.  Ikit,  on  the  other 
hand,  if  labor  were  absent  capital  could  j^iroduce 
nothing  whatsoever,  and  consequentl}'  one  hundred 
per  cent,  of  the  present  product  belongs  to  labor. 
Then,  if  we  were  to  re\'erse  the  j^rocess,  and  add  to- 
gether the  several  shares  assigned  to  the  various 
factors,  after  this  method  of  subtraction  had  been 
carried  out.  ^\■e  might  find,  as  we  pleased,  either  that 
the  })roduct  had  been  assigned  many  times  over,  or 
that  the  larger  part  of  it  had  not  been  assigned  at 
all.      It  is  sufficiently  obvious  that  we  cannot  deter- 


The  Ilea  no  III  2c  Contribution.  123 


mine  the  contribution   of  an\-  factor  to  the  product 
by  this  indirect  method  of  subtraction." 

The  sum  of  the  wliole  matter  is  that  we  ought  not 
to  transfer  to  ch'stribution  the  ideas  which  are  neccs- 
sar)-  in  [^rothiction.  The  mci'e  fact  that  an  agent  is 
em[)lo}-cd  in  tlie  [jrocesses  of  production  affords  no 
reason  wh}- a  part  of  the  prochict  shoukl  be  assigned 
to  it,  as  the  case  of  the  free  gifts  of  nature  is  suffi- 
cient to  pi'(n-c'.  i\n  analogy  will  make  the  point 
clear.  Pli^'sical  laws  and  plu'siccd  conditions  must 
be  present  before  a  man  can  be  pushed  over  a  preci- 
pice; but  we  ha\"e  no  Idame  for  the  law  of  gra\'ita- 
tion,  or  for  the  geological  forces  which  shaped  the 
formations  of  the  district.  \W'  do  not  liold  them 
responsible,  but  reserve  our  blame  for  the  human 
agent  who  ma\',  to  the  sum  total  of  physical  causes 
and  contlitions,  ha\'e  made  the  smallest  physical 
coiUribution.  i\s  in  the  moral  distribution  of  re- 
spon>ibilit\-  and  blame  so  in  the  economic  distribu- 
tion of  the  jjroduct.  l\Iere  ph\-sical  contribution  to 
the  result  is  a  matter  of  nij  iniportance  whate\'er. 
In  the  distribution  of  the  product  no  share  at  all 
\\'ill  be  assigned  unless  the  factor  is,  so  to  speak, 
able  to  make  a  claim  and  able  to  make  its  claim 
good  in  some  wa\'  or  other.  The  claim  must  be 
su[)ported  b\-  a  threat,  and  tlie  power  to  carr\"  out 
the  threat  is  the  sole  measure  of  the  share  which  the 

*  Thi^  nu-thiHi  In^  Iicl-u  uii!ie-itat;nL;I\' ciniili  i\"l''1.  \\\\]\  rc-~ult>  iiin^t 
in  itiiiiiiL;  t'l  the  fi'iciiil^  aiul  (•lKuiipi"n,-,  lif  I.iImi',  !'}•  Mi-.  Malloch 
lhn.i;.;li-i;;  hi.  l.ri!li.i!.;  c--ay.  /,;/  r  , /■.■./  /■:■  /\f':i.\;r  U'rl/arc-.  and 
the  futilitv  ')f  the  niL-thinl  i>  the  muicrh  iiiLT  fallacv  of  tlic  Imnk. 


124  l'^^'^  Bargain  Theory  of  Wages. 


otlicr  claimants  will  allow  to  pass  into  the  possession 
of  the  first  claimant.  The  threat  which  can  be  used 
with  effect  is  to  withdraw  the  agent  from  the  co^ 
operation,  and  if  the  agent  were  a  unit  the  power  to 
make  the  threat  good  would  cause  the  transfer  to 
that  agent  of  the  difference  between  the  product 
with  its  co-operation  and  the  product  without  its 
help.  But  no  agent  is  a  unit  and,  although  the 
agent,  as  a  whole,  is  indispensable,  the  whole  may 
be  so  great  that  no  particular  unit  of  that  agent  can, 
with  any  hope,  claim  to  be  indispensable.  If  the 
agent  is  available  in  such  quantity  that  there  need  be 
no  shadow  of  fear  that  the  supply  of  it  will  not  be 
sufficient  to  meet  the  demand,  or,  in  other  words, 
if  the  supply  of  the  agent  is  so  great  that  the  other 
agents  need  have  no  fear  of  being  deprived  of  its  co- 
operation, no  attention  v.'ill  be  paid  to  the  claim. 
The  free  gifts  of  nature,  precisely  on  this  account, 
receive  no  share  of  the  profit.  When  there  is  any 
means  of  liniiting  them,  they  are  appropriated  and 
their  claims  are  enforced  by  the  threat  to  withdraw 
the  supply  of  that  agent  from  co-operation  with  the 
other  agents. 

There  is  no  right  inherent  in  any  agent  why  its 
claims  should  be  allowed  :  its  claims  are  admitted 
by  the  rival  claimants  onl\'  l)ccause  they  are  forced 
to  admit  them.  Should  tlie\-  be  able  to  make  better 
terms  for  themseh'es.  b\-  encouraging,  so  to  speak, 
some  substitute  for  a  particular  agent  of  production, 
that  encouragement  will  be  gi\'en.  In  the  main,  it 
is  true  that  the  coiitribution   rendered  by  the  a<''ent 


TJic  Laij  of  Substitution.  125 


can  be  rendered  by  that  agent  alone;  but  between 
labor  and  capital  there  is  some  possibility  of  substi- 
tution. When  the  wages  of  labcM'  are  high  there  is 
a  decided  impetus,  as,  for  instance,  in  the  United 
States,  gi\en  to  the  introduction  of  labor-saving 
machiner}-.  It  is  cheaper  to  employ  machinery 
than  labor  because  the  claim  made  on  behalf  of  the 
capital  cml)()died  in  it  is  lower  than  the  claims  made 
on  behalf  of  the  labor  it  tends  to  displace.  The 
claims  of  labor  will  therefore  be  disregarded  to  the 
extent  to  which  the}-  are  in  excess  of  the  claims  of  the 
capital  which  may  replace  it,  and  the  value  of  labor 
will  be  determined,  not  by  the  claims  which  are 
made  by  and  allowed  to  the  marginal  laborer,  but 
by  the  claims  which  are  made  by  and  allowed  to  the 
marginal  substitute  for  labor.  This  process  of  sub- 
stitution has  not  resulted  in  reducing  the  claims 
allowed  to  labor,  though  it  has  possibh'  checked 
their  adwmce,  because  in  the  long  run,  machinery 
has  not  o\'er  the  whi)le  field  of  labor  caused  a  dim- 
inution of  the  demand  for  lab(Tr. 

The  claim  which  ma\-  be  allowed  to  any  agent  of 
production  ma}'  be  large,  not  because  it  has  excep- 
tional power  to  enforce  its  threat  to  "  strike,"  but 
because  the  power  which  the  other  agents  ha\-e  to 
enf(^rce  their  claims  is  relati\-e]\-  -weaker.  In  the 
coiiter-t,  or  C'im]),-titioi-i,  foi-  tlie  jtroduct  a  larger 
share  ma\'  go  to  capital  because  labor  i-.  disDrgani/.ed 
andtolab:>i-  be'cau-^e  improx'ed  communication  has 
made  new  l.uid  and  natural  re-soui'ces  awailable. 
When    the   margin   of  the  profitable  application   of 


126 


TJic  Bargain  Theory  of  Wages. 


any  agent  extends,  all  the  agents  or  claimants  will 
gain,  but  the  agent  whose  conditions  have  changed 
will  gain  the  least  by  the  change.  Its  relativ^e  re- 
ward will  decrease  and  its  absolute  reward  will  no't 
increase  in  the  same  proportion  as  the  absolute  re- 
ward of  the  other  agents;  and  the  reason  is  that 
owing  to  the  increase  of  the  supply  the  power  of 
making  its  threat  good  has  been  impaired. 

The  definite  shares  of  the  product  which  are 
allotted  to  the  various  claimants  are  not  determined 
by  the  inherent  right  of  one,  or  other,  of  them  to  a 
precise  amount,  but  by  the  comparative  strength  of 
the  various  claimants.  The  shares  are,  therefore, 
mutually  determined  and  determining;  and  we  may 
therefore  give  up  the  search  after  some  definite 
principle,  or  principles,  which,  directh',  or  indirectly 
by  the  method  of  residues,  would  predetermine  the 
share  of  any  one  of  them  ;  for  the  position  of  any 
claimant  may  improx'c,  or  beconic  worse,  without 
any  alteration  in  itself,  mereh-  by  an  alteration  in 
the  relative  stren^zth  of  another  claimant. 


CIIArXER   IV. 

THE    liAKGAIX    rilEOKV    OF   WAGES. 

THE  mistaken  quest  for  a  principle  which,  singly, 
shall  ha\'e  determining  power  has  generally 
led  to  an  extreme  and  one-sided  statement  of  the 
principle.  It  has  been  stretched  to  explain  all  the 
phenomena  r)f  wages;  and  it  has  been  an  eas)-  task 
for  the  critics  to  show  that  it  is  not  sufficient  to 
co\x'r  the  whole  ground.  Man\'  facts  have  to  be 
acconinKulated  to  the  theory  and  others  left  com- 
pleteh'  unexi)Iained  and  unexplainable.  As  long  as 
the  critic  confines  himself  to  his  criticism,  his  course 
is  clear  autl  liis  argument  unanswerable;  but  when, 
in  the  triumph  of  his  destructi\'e  criticism,  he  be- 
comes confident  enough  lo  state  his  own  theor\-,  the 
tables  are  turned,  and  the  new,  or  rexdved,  theory  is 
ea>ily  shown  to  he  open,  if  not  to  similar,  yet  to 
equal]}-  weight}'  oljjectiiuis.  No  theory  seems  strong 
enough  to  meet  the  (objections  which  are  raised 
again>t  it;  because  no  tlieor}'  is  adequate  iov  the 
ex[)lanaliiMi  of  all  tlu'  facts.  The  reason  for  this 
universal  breakdown   is  that   the  criticism  is,  in  the 

127 


128  TJic  Bargain  Theory  of  ]Vages. 


main,  merely  destructive.  A  principle  is  shown  to 
be  inadequate  to  account  for  the  determination  of 
wages  under  certain  circumstances  and  is,  there- 
fore, promptly  rejected  i)i  toto  ;  and  a  new  theory  , is 
put  forward  to  explain  what  the  rejected  theory 
had  not  explained.  But  the  new  theory  is  generally 
found  to  be  inadequate  to  explain  what  the  old  had 
explained. 

The  consequences  of  the  doctrine  of  evolution 
have  not  yet,  in  spite  of  the  adoption  of  its  phrase- 
ology, been  fully  realized  by  economists,  or  we 
should  have  less  of  this  purely  destructi\-e  criticism 
and  hasty  and  contradictory  construction.  No 
theory  which  has  obtained  the  approwil  of  a  large 
number  of  investigators  of  industrial  phenomena, 
and  kept  it  for  any  length  of  time,  can  be  totally 
devoid  of  foundation.  It  may  not  express  the 
whole  truth,  but  it  must  present  some  sort  of  expla- 
nation of  large  groups  of  facts,  and  no  polemical 
fervor  can  justify  the  total  rejection  of  a  theory 
which  presents  some  part  of  the  truth  of  the  indus- 
trial situation.  This  destructive  criticism  has  been 
inspired  by  the  notion  that  the  principle  must  ex- 
plain all  the  facts  or  none  at  all;  but  when  we  get 
rid  of  the  idea  of  the,  nccessaril}',  absolute  deter- 
mining power  of  a  single  principle,  the  v^-a}-  is  open 
to  us  to  recognize  the  measure  of  truth  and  expla- 
nation contained  in  each  of  the  three  priiicipal 
theories  that  ha\'e  been  adwinced,  and  to  construct 
a  theory  which  shall  gi\'e  due  place  to  the  element 
of   truth    which    each    has   been    shown    to   contain. 


Tlic  Defects  of  Wage  Theories. 


129 


The  errors  of  tlie  theories,  considered  in  the  first 
three  chapters,  ha\e  arisen  from  makini^^  a  sohition 
of  a  part  of  the  problem  do  duty  for  the  sohition  of 
the  whole;  and  the  remed\-  consists  not  in  indis- 
criminate criticism  and  rejection,  but  in  givini^  each 
theory  its  proper  place.  The  subsistence  theory  is, 
in  the  main,  a  theory  of  the  supply  i)rice  of  labor — in 
its  earlier  and  later  forms  a  theory  of  the  necessary 
suppl}-  price  determined  !)}•  the  cost  of  production 
(variously  interpreted) — in  its  usual  modern  form, 
almost,  it  mi_L;"ht  be  said,  a  theory  of  market-supply 
price  or,  at  an\-  rate,  of  the  \'ariations  of  the  market- 
supply  price  alhK'e  the  necessary  sup})ly  price.  It 
errs,  on  the  one  hand,  as  a  cost  of  production  theoiy 
is  bound  to  err,  in  nes^dectini^  the  question  of  a  pos- 
sible dc-mand  price,  and,  on  the  other  hand,  in  inter- 
preting^ the  supply  price  of  labor  too  narrowly.  It 
assumes  throuL;"hout  that  labor  is  a  commodity  with 
prett\-  much  the  same  characteristics  as  other  com- 
modities which  are  bou;j;ht  and  sold  ;  and,  therefore, 
except  in  the  \'a;4uer  form  of  the  principle  as  the 
standard  of  comfort,  it  is  forced  to  nei^lect  the  fact 
that  the  su[~>[)l\-  price  of  Ial)or  is  not  determined  ex- 
traneousl)-,  but  is  l<ir_u;cl\- self-determined.  The  su})- 
pl\'  })rice  of  laljor  is  not  determined,  soleh'.  by  the 
amount  of  the  necess.u'ies,  comf(^rts,  and  luxuries 
which  are  necessar\-.  from  physioloL;'ical  causes  or 
from  custom  and  habit,  to  support  the  laborer. 
These,  as  we  shall  see  later,  form  the  principal  ele- 
ment in  the  suppl\-  price,  but  the}-  do  not  constitute 
the  whole  of  it  ;  nor  is  an\- sulficient  reason  su^-^i^ested 


1 30  TJic  Bargain  Theory  of  Wages. 


in  the  theory  why  they  should  form  even  part.  The 
supply  price  of  labor  is  not  a  price  determined  by 
forces  over  which  the  laborer  has  not  full  control : 
it  is  simply  an  estimate  which  the  laborer  forms  of 
what  he  (not  necessarily  his  work)  is  worth ;  and 
many  elements  enter  into  it,  besides  food  and  cloth- 
ing and  shelter  and  even  recreation.  The  supply  price 
is  not  a  minimum  below  which  wages  cannot  fall, 
or  a  maximum  beyond  which  they  cannot  rise.  It  is 
true  that  wages  cannot  easily  fall  below  the  standard 
of  subsistence,  interpreted  in  the  strictest  and  nar- 
rowest physiological  sense,  but,  owing  to  the  prog- 
ress of  the  working  classes,  this  form  of  the  theory 
has  been  abandoned.  In  any  other  sense,  whether 
industrial  or  optimistic,  the  standard  of  subsistence 
cannot  be  regarded  as  an  absolute  minimum.  The 
degradation  of  labor  is  a  melancholy  fact  of  too  fre- 
quent occurrence  in  industrial  history  to  permit  us 
to  accept  the  standard  of  subsistence  as  an  insur- 
mountable barrier.  A  man  can  live  on  less,  and  he 
may  be  forced  by  the  fluctuation  of  industry  for  the 
time  being  to  accept  less,  than  -will  secure  for  him 
that  amount  of  the  necessaries,  comforts,  and 
luxuries  of  life  which  he  naturally  thinks,  or  has 
come  to  think,  as  his  due.  The  supply  price  of 
labor  is  simply  an  estimate  by  \\hich  the  laborer  is 
prepared  to  stand  and  for  which  he  is,  if  need  be, 
prej)ared  to  fight.  l)Ut  the  greatest  omission  in  the 
theor\'  is  the  neglect  of  the  (juestion  of  the  demand 
price  of  labor.  If  we  could  acce[)t  without  cpialifi- 
cation   the   cost   of  [jroduction  theory  of  \'alue,  the 


Dc}iia)i({  Price  and  Supply  Price.  131 


omission  would  not  be  serious;  for,  accordinr^  to 
this  theory,  nuctu.itions  apart,  all  \'alues  are  deter- 
mined by  su[)pl}-;  but  "  cost  of  production"  was 
shorn  of  much  of  its  siiniificance  b}-  Mill,  and  relc- 
t;'ated  to  the  back;_;!'ound,  where,  unless  when  brou<^ht 
forward  to  be  definilcK'  repudiated,  it  has  remained. 
If  labor  is  a  Comnii  xHl}-,  it  has  not  onl)-  a  supply 
price  but  a  demand  price;  and  the  modern  theory  of 
wa^es  practical!}'  anticipated  those  theories  of  value 
which  fmtl  that  \"alue  is  determined  by  utility, 
in  C(MisiderinL;'  only  the  question  of  the  demand 
price. 

In  the  standard  of  subsistence  theory,  as  well  as 
in  the  productixdty  of  labor  th.eor}'.  too  much  stress 
is  laid  on  the  allejj;ed  fact  of  concomitant  variation. 
This  concomitant  variation  of  wa<:^es  with  the  cost 
of  li\-inL;-.  on  th,e  one  hand,  and  with  the  efficienc}' 
of  lab'H'  on  the  other,  we  found  to  be  neither  so  in- 
wu'iable  nor  so  close  as  was  allet^ed  ;  and  }'et  to  be 
ch^se  enou;4h,  in  botli  instances,  to  justif\-  both  the 
theories  as  approximate  explanations  of  the  facts. 
In  the  lanj^uaL^e  of  formal  loi^ic,  it  mii;ht  be  safe  to 
conclude  that  the  two  principles  were  in  effect  not 
so  much  contrary'  as  sul)contrary  propositions.  At 
an\'  rate,  both  of  them  .are  in  a  measure  true  if 
noitiur  is  ])u.^h(xl  to  an  (.-xtriMne.  Unfortvmately 
the  oxp-ini'nts  of  both  theories  haw  pu-lied  tliem  to 
extremes  and,  in  a-; /■!  tin;.;'  the  truth  of  the-ir  own 
principle.  ha\'e  im.ii^ined  that  t]ie\-  \\ei'e  ;)ro\'inL;  the 
fal-it\-  of  e\-er\"  other.  lUit  a  theor\-  of  the  supply- 
price   of  l.ibiir  need   not   beset   in   antaLjiniism   over 


132  TJie  Bargain  Theory  of  Wages. 


against  a  theory  of  a  demand  price.  Both  may  be 
true  and  both  are  necessary  for  a  complete  state- 
ment. The  productivity  theory  amounts  to  an  un- 
quahfied  assertion  of  the  demand  price  of  labor  as 
the  determinant  of  wages.  It  ignores,  almost  com- 
pletely, the  supply  of  labor  because,  optimistically, 
it  considers  the  question  of  a  supply  price  irrelevant 
and  unnecessary.  The  demand  price  is  necessarily 
higher  than  the  supply  price;  and  the  motive  which 
the  employer  has  in  paying  wages,  and  the  beneficent 
results  for  the  laborer  of  the  competition  of  master 
with  master,  render  the  consideration  of  a  possible 
supply  price  unnecessary.  The  demand  price  is 
fixed  by  the  estimate  which  the  employer  forms  of 
the  efficiency  of  labor,  and,  as  the  demand  price  is 
higher  than  any  possible  supply  price,  the  latter  is 
ignored,  except  in  so  far  as  the  supply  price  of  labor, 
or  the  most  important  element  in  the  supply  price, 
food  and  clothing  and  shelter,  affect  the  efficiency 
of  the  laborer.  It  is  undoubtcdl}-  true  that  in  pay- 
ing wages  the  em})lo}'er  is  influenced  by  his  estimate 
of  what  the  laborer  is  worth  to  him,  and  this  estimate 
constitutes  the  demand  price  of  labor.  In  the  case 
of  labor,  as  in  the  case  of  all  other  commodities,  the 
demand  price  is  generally  higher  than  the  supply 
price.  Tliis  arises  not,  as  in  ordinary  exchange, 
froni  the  low  marginal  utilit\-  of  that  with  which  the 
seller  parts,  but  froni  the  necessities  f)f  the  laborer. 
But,  although  the  demand  price  is  general!}-  the 
higher,  or,  to  be  more  accurate,  rdthough  the  demand 
estimate   is  generally  higher  than  the  supply  esti- 


The  Don  (Did  Price  not  Fixed.  133 

mate,  it  does  not  follow  that  the  supply  price  is 
a  iiei,di_L;ible  ciuaiitity.  The  deinatid  price  is  not 
fixed  and  absolute.  It  certain]}-,  even  under  the 
beneficent  intluence  of  the  competition  of  master 
with  master,  cannot  be  rcc^arded  as  a  minimum. 
The  moti\-e  for  pa\-ini;'  waL:^es  is  tlie  hf)pe  of  a  sur- 
plus; and  the  lower  wai^^es  can  be  fixed  compatible 
with  efficiency  the  lar^-er  the  surplus  the  employer 
ma\'  ho[)e  to  realize;  anil  there  is,  therefore,  a  rea- 
son why  the  emplo}'er  should  seek  to  pay  less  than 
he  thinks  the  labor  is  worth.  The  supply  price, 
however,  is  a  practical  limit  to  his  powers  of  re- 
ducing wa^'es.  To  reduce  way;es  tlown  to  the 
supply  price  and  to  attempt  to  lower  them  further, 
will  destroy  the  labc^rer's  hopefulness  and  irritate 
him  into  a  wild  sense  of  injustice.  If  the  supply 
price  is  hiL^'h  the  enlii;htened  en^iployer's  efforts  to 
reduce  waives  will  soon  be  checked  by  the  decline  in 
tile  laborer's  efficiencx",  which  depends  so  much  on 
mental  and  moral  (jualitics:  if  the  supply  price  be 
low,  the  actual  price  of  labor  may  be  low,  not 
nierel\-  because  the  laboi'er  is  less  efficient,  which  he 
[)rob;ibI\'  is,  but  because  the  employer  ma\-  h(^pe  to 
realize  a  lari^'er  surplus  without  killini^^  the  goose 
that  la\-s  the  Lj,"ol(len  ec^;j,-s  for  him.  In  either  case, 
the  suppl\-  price  of  labor  is  of  importance  because  it 
is  the  em})!(n'er's  interest  to  pa\-  as  much  ks^  than 
the  labor  is  woith  to  him  as  the  Iab;)rer  will,  readily 
and  without  irritation,  accept. 

The  \\'a;_;"esd-'und  Theory,  in   a  measure,  is  a  rec- 
onciliation  of  these   two  theories;   but  the  reconcili- 


134  TJic  Bargain  TJicory  of  ]Vagcs. 


ation  is  premature.  It  presents  a  theory  of  the 
demand  and  the  supply  of  labor,  but  treats  both  de- 
mand and  supply  from  an  impersonal  and  quasi- 
objective  standpoint.  Demand  and  supply  are  fixed 
by  what  are,  so  far  as  the  theory  of  wages  is  con- 
cerned, extraneous  forces.  Supply  is  not  relative 
to  price,  but  independent  of  price,  and  the  causes  of 
the  determination  of  the  su})ply  are  considered  out- 
side the  theory.  The  causes  which  determine  the 
demand  are  not  so  cavalierly  dismissed  ;  but  the  de- 
mand is  regarded  as  a  quantity  and  not  as  relative 
to  a  price.  The  fundamental  error  of  the  Wages- 
Fund  Theory  consists  in  treating  both  suppl)-  and 
demand  as  fixed  quantities.  The  laborer  must  work, 
therefore  the  supply  of  labor  is  absolute.  The  em- 
ployer, out  of  his  own  intention,  fixes  the  Wages 
Fund  which  must  be  expended,  and,  therefore,  the 
law  of  wages  is  the  proportion  between  demand  and 
suppl)'.  But  the  laborer,  though  he  must  work,  is 
not  merely  passi\"e,  and  the  employer,  like  other 
men,  forms  some  estimate  of  the  worth  of  what  he 
purchases;  and,  although  vre  may  speak  of  a  propor- 
tion between  fixed  and  rigid  quantities,  we  cannot 
speak  of  the  law  of  wages  being  the  proportion  be- 
tween the  demand  and  suppl}-  of  labor.  [Mill's 
emeiuuition  "  equation  "  is  better,  but  all  analogies, 
even  m;ithematical  analogies,  are  mi>leading.  The 
supph'  of  labor  cannot  be  considered  apart  from  the 
fact  tliat  labor  and  the  laborer  are  inse}:)arable  :  the 
dem.ind  for  labor  arises  fi'om  the  moti\-e  which  the 
em})Io\-er  has  in  pa\'ing  A\'ages,  \'iz.,  the  realization 


TJic  Form  of  tJic  CoDiplctcd  Theory.  135 


of  a  surplus  product,  atul  is  not  independent  of  his 
estimate  of  what  the  hibor  wliich  he  purchases  is 
\V(,)rth.  W'a^^es  are  the  resuR  of  an  e([uation,  if  we 
must  use  Mill's  term,  of  the  sui)pl\'  estimate  .and 
the  ilemantl  estimate,  and,  if  the  ecpiation  is  not 
estal.)li>hed  at  first,  the  solution  of  the  problem  is 
reached,  as  it  is  reached  in  all  other  bu^ang  and 
selling'.  b\'  barL;aininL;". 

The  \\'.i;4es-l'\ind  'idieory  is,  in  form  at  least,  the 
most  adequate  attempt  to  resol\-e  the  wa^es  tjues- 
tion.  It  recoi^nizes  that  there  are  two  sides  to  the 
ecpiation  and  devotes  considerable  attention  to  the 
force  which  establishes  the  ecpiation.  This  force  it 
calls  com[)etition.  Thus  it  presents  the  foi'm  of  a 
complete  theory;  and  the  object  of  the  remaintler 
of  this  chapter  is  to  tit  the  material  of  the  Subsis- 
tence Theor\'  and  of  the  I'roductivity  Theor}'  to  the 
form  of  the  \\'a;4"es-l'und  Theor\-. 

In  tile  last  chapter,  \ve  saw  in  what  sense  the 
st;;tement  that  labor  is  a  ctjmmoLlit}'  is  to  be  under- 
stood. I'A'en  in  the  most  ach'anced  indu,--trial  sta_L;es, 
the  buyin;4  and  selliuL;"  of  labor  continues  in  many 
respects  to  exhil)it  the  characteristics  of  primitive 
exchaiiL^e.  T!ie  difficulty  of  securiiv^  that  double 
C(ancidence  which  is  necessar}-  for  barter  does  not 
ap;)ecU'.  because  labor  is  in  steady  dciiiarid  ;  and  the 
labor  markat,  thou;_;li  not  or;^'ani/.ed  lil<e  the  m(aiey 
market,  is  not  in  a  state  of  chaos.  It  i>  not  because 
lal)or  i>  lc<>  mobile  th:ui  other  l';oo(1s  tliat  it  retains 
the  chai'acteri:4ics  of  [)i-imit  iw:  exrluu.v^e,  but  because 
tw<)   M'[)arate  e.-^tim.ites  of   ulililx'  enter  into  the  de- 


136  The  Bargain  TJicory  of  Wages. 


termination  of  the  ratio  of  exchange.  In  the  case 
of  direct  and  primitive  exchange  of  goods  for  goods, 
each  of  the  exchangers  has  his  own  estimate  both  of 
what  he  wishes  to  obtain  and  of  what  he  parts  with 
in  order  to  obtain  it.  The  primitive  exchanger  is 
supposed  to  compare  the  marginal  utihty  of  the  two 
commodities  which  are  to  be  exchanged,  and  the 
exchange  takes  place  only  when  the  bread  or  the 
water  or  the  diamonds  with  which  one  parts  has  a 
lower  marginal  utility  than  the  commodity  which 
one  gains.  But  with  the  organization  of  industry 
and  the  extended  application  of  the  principle  of  the 
division  of  labor,  the  estimate  which  the  exchanger 
places  on  the  commodity  which  he  offers  in  exchange 
becomes  of  less  importance.  He  has  it  in  superfluity 
and,  even  when  he  could  use  in  his  own  consump- 
tion the  commodity  he  produces,  its  marginal  utility 
must  be  almost  as  low  as  zero.  The  producer  pro- 
duces only  to  exchange  and,  in  the  actual  exchange, 
therefore,  looks  almost  exclusively  to  the  utilities 
of  the  articles  which  he  seeks  to  obtain.  He  may 
withhold  part  of  his  output;  but  his  object  in  so 
doing  is  to  obtain  a  larger  amount  of  the  commodity 
he  desires.  His  motive  is  never  the  affection  he 
has  for  the  fruits  of  his  own  labor  or  the  direct  utili- 
ties which  the  commodities  can  afford  him.  The 
seller's  personal  estimate  has  little  influence  in  deter- 
mining whether  the  commodity  is  sold  or  not.  His 
minimum  price  is  determined  solely  by  the  cost 
of  production — what  determines  the  cost  of  pro- 
duction  is  not   our  problem — and  his  objection   to 


Labor  a  Personal  Coiiu)iodity.  137 


parting  with  the  commodity  below  cost  does  not  lie 
in  the  fact  that  he  can  use  it  to  better  advantage — 
that,  even  in  the  ha\-ing  it,  there  is  more  utility 
than  can  be  obtained  by  parting  with  it  at  a  sacri- 
fice. This  is  true,  notwithstanding  the  fact  that, 
directi}'  or  indirectly,  the  commoclit}'  is  the  product 
of  his  own  labor  or  sacrifice;  not  onl\'  because  under 
modern  coiulitions  this  sacrifice  of  comfort  is  sjMxad 
out  over  a  large  area  owing  to  the  division  of  lal:)or, 
but  also  because  it  is  a  thing  of  the  past.  The 
manufacturer  wIkj  sells  the  output  of  his  mills  does 
indeed  sell  the  results  of  his  exertions  and  his  absti- 
nence; but,  nevertheless,  he  \\\\\  not  withhold  a 
single  hank  of  yarn  or  a  single  yard  of  cloth  from 
the  market  because  he  has  exerted  his  powei-s  of 
mind  and  body,  or  sacrificed  his  immediate  comfort, 
in  fashioning  them.  IvLither  \vill  reflection  on  these 
past  exertions  make  him  the  more  willing  to  sell,  that 
the}'  ma\'  not  go  unrewarded.  The  exertion  is  o\-er 
and  past;  and,  though  future  cxertioiis  ma\'  be 
limited  because  the  reward  for  past  exertions  is  con- 
sidered inadequate,  }-et  past  exertion  has  little  to 
do  with  the  determination  (^f  present  price.  lUit 
the  less  remote  the  exerticMi  and  the  less  the  extent 
to  which  the  dix'ision  of  labor  is  carried  in  produc- 
tion, the  more  will  the  seller's  sense  of  the  exertions 
1k'  has  put  foith  and  the  s:ici'ihces  he  has  undergone, 
altect  his  readiness  to  sell  at  any  pi'ice.  An  artist, 
in  so  far  as  he  is  animated  b\-  the  coninwrci.d  moti\-e, 
is  more  likel}-.  otlu'r  things  being  the  same,  t(^  hold 
his  picture  for  an  adecpiate  price  than  the  weaver 


138  TJic  Bargain  TJicory  of  Wages. 


his  cloth.  The  artist  has  completed  the  whole 
operation  and  has  in  his  hands  at  one  time  the  com- 
pleted result  of  his  exertions.  The  work  that  he 
has  fashioned  is  more  to  him  than  the  yarn  is  to  the 
master  spinner;  thougli  the  painter,  too,  will  part 
with  the  picture  at  what  he  considers  an  inade- 
quate price  rather  than  have  it  left  on  his  hands. 
The  lal)orer,  however,  is  still  nearer  to  his  labor 
Avhich  he  sells  than  the  artist  is  to  his  picture.  He 
has  but  little  interest  in  the  product  which  he  is 
engaged  in  making.  He  has  already  contracted 
himself  out  of  all  claim  on  it.  What  he  parts  with 
is  really  not  the  fruits  of  past  exertion,  but  the  right 
to  use  his  labor.  All  the  time  that  the  exchange  is 
being  effected,  he  is  continuously  conscious  of  his 
personal  interest  in  what  he  sells.  Since  all  labor 
invcdves  disutility,  we  can  never  speak  of  the  laborer 
parting  with  that  \\hich  has  a  low  marginal  utility 
to  obtain  that  which  has  a  high  marginal  utility. 
Directly  the  ptnvcr  to  labor  may  be  of  little  use  to 
the  laborer,  but  the  disutility  of  labor  remains  great. 
Were  the  laborer  able  to  take  a  pureh"  objective  view 
of  what  he  sells,  the  price  of  labor  might  be  deter- 
mined as  the  price  of  all  other  commodities  is,  almost 
entirely  from  the  side  of  demand;  but  the  memory, 
or  the  anticipation,  of  the  disutilities  of  exertion  is 
too  strong  to  permit  him  to  take  an  impersonal 
view  and,  consequenth'.  he  will  insist  more  strongly 
than  either  the  manufacturer,  or  the  artist,  on  ob- 
taining an  equi\'alent  for  the  inconveniences  he  has 
incurrc:d  or  is  lilvcly  to  incur.     All  that  a  man  hath 


Labor  a  U)ii(JUl  Coiinuodity.  139 

will  he  give  for  his  life,  and  ihc  laborer's  necessities 
may  be  so  i;reat  UkiI  he  esliniales  the  clisutiHties  of 
labor  as  ikUIhul;"  compared  with  the  utilities  he  de- 
sires; \-et,  ho\vc\'er  hiL^hl}'  he  estimates  the  utilities 
of  the  reward  and  howe\'er  indifferen.t  lie  may  there- 
fore be  to  the  disutilities  of  labor,  he  will  not  work 
unless  the  utilities  are.  at  least,  an  e([ui\'alent  in 
satisf;iction  to  the  disutilities  incurretl. 

Labor,  on  this  account,  remains  a  thin;_;"  apart.  It 
has  inL'\-itabl\'.  [)erha])s  fortunatel}-,  but  certainl}' 
ine\-itably,  la;j,';^ed  behind  in  the  i)rocess  of  the 
sim[)lification  of  exchange,  which  has  L;'one  so  fcU'  in 
the  case  of  other  commodities  as  practical!)'  to  elimi- 
nate the  seller's  estimate  from  the  bar^^ain.  I'h'om 
the  bu}-er's  point  of  xdew  l;djor  has  not  !aL;L;\:d  much 
behind.  In  pi'imiti\'e  exch;m;,;'e  the  decision  to  buy 
or  to  sell  depentls  on  wliether  tlie  inaliiect  utilities, 
wh.it  b}'  the  AustricUi  economists  is  called  the  sub- 
jecti\'e  exchan_L;'e  \-alue,  exceed  the  direct  utilities  or 
not.  Under  modern  ind.  u.-.trial  conditioiis,  the 
direct  utilities  are  of  comparati\'el\-  little  importance 
compared  with  the  indirect.  The  bu\"er  of  laljor 
must  postpone  the  con.suniption  of  some  portion  of 
that  share  of  the  re;d  income  of  society  wliich  has 
fallen  to  him;  but  since  he  bu)-s  labor,  not  for  im- 
meiliate  L;"ratification.  l.)ut  to  proiluce  and  to  make 
mone\-,  the  utility  which  he  sacrifices  does  not 
\\ei;4h  much  with  h.im.  He  fixes  his  att'.:ntion  far 
more  (^\\  the  commodities  he  seek's  ttj  obtain  b\'  help 
of  tlu:  labor  he  liires  tli.in  on  the  utilities  he  hands 
over  to  the  laborer  in  exchanue  :  altlKjurh  the  direct 


140  T)ie  Bargain  Theory  of  Wages. 


utilities  are  not  without  influence  on  the  estimate 
he  forms  of  what  the  labor  is  worth  to  him. 

The  price  of  labor  is  determined  somewhere  be- 
tween two  estimates  placed  upon  it — the  estimate 
of  the  employer  and  the  estimate  of  the  laborer. 
The  estimate  of  the  laborer  is  the  resultant  of  two 
factors— one  positive  and  one  negative — the  utility 
of  the  reward  and  the  disutility  of  the  labor;  and 
the  estimate  of  the  employer  is  on  the  whole  de- 
pendent on  the  indirect  utilities  afforded  by  what  he 
purchases,  or  rather  b}'  the  discounted  value  of  the 
product  created  by  the  laborer's  exertions.  Should 
the  laborer  place  too  high  an  estimate  upon  what 
he  offers  to  sell,  or  the  employer  too  low  an  estimate 
on  what  he  \\ishes  to  buy,  no  exchange  will  be 
effected;  but.  in  general,  the  necessities  of  the 
laborer  and  the  motives  of  the  employer  prevent 
any  such  difficulty  from  arising.  The  pressure  of 
the  laborer's  necessities  is  such  that  the  reward 
which  the  employer  offers  is  generally  sufficient  to 
cover  the  disutility  of  labor. 

I^etwcen  these  two  estimates  the  value  of  labor  is 
determined  by  the  forces  b\'  which  all  exchanges  are 
effected.  These  two  estimates  are  a  maximum  and 
a  minimum.  The  bu)-er  is  neither  anxious  nor  will- 
ing to  offer  as  much  as  his  estimate.  On  the  con- 
trary, he  naturally  desires  to  obtain  \\\\:\t  he  wishes 
as  much  as  possible  below  his  estimate  of  \\'hat  it  is 
worth  to  him.  Mis  moti\'e  in  bu}-ing  labor  is  to 
obtain  the  surplus  of  the  price  which  the  product 
realizes  o\'er  the  advances  he  has  to  make  to  obtain 


The  Limits  of  Wages. 


141 


it;  and  the  smaller  the  achaiiccs  he  has  to  make  the 
greater  the  surplus  which  remains  in  his  possession. 
His  estimate  of  what  labor  is  worth  is  a  maximum 
beyond  which  he  can,  onl)'  with  the  greatest  diffi- 
cidty,  be  forced  to  go.  The  difficult}-  arises  from 
the  opposition  which  the  other  claimants  to  a  share 
in  the  product  will  offer  to  any  disturbance  of  the 
balance  which  has  already  been  established.  Should 
he  be  forced  to  offer  more  than  he  can,  consistently 
with  this  balance  of  claims  (including  his  own),  he 
will  ha\-e  to  face  the  necessit}-  of  establishing  a  new 
balance  unless  he  is  content  to  see  his  own  share 
shrink  without  a  })rotest.  Up  to  his  estimate  the 
employer  can  freely  offer,  but  the  less  he  can  force, 
or  induce,  the  laborer  to  accept,  the  larger  his  own 
share. 

The  laborer,  on  his  side,  does  not  regard  his  esti- 
mate as  a  maximum.  On  the  contrary,  even  should 
he  be  successful  in  extracting  from  the  en^iployer  the 
full  measure  of  the  oniplin"er's  estimate,  it  does  not 
follow  that  he  is  ([uite  satisfied.  lie  has  expended 
energy  which  it  rc(juires  food  and  clothing  and 
shelter  to  replace:  he  has  occu^jicd  a  position  of  de- 
pendence and  restraint,  for  the  irksomeness  of  which 
he  insists  on  such  a  compensation  in  satisfaction,  or 
the  means  of  satisfaction,  as  \\\\\  malce  him  feel  his 
own  master  during  Ids  leisure  liom-s:  !u'  has  sutTered 
from  the  monotony  of  woi'k,  in  wliich  he  has  little 
immediate,  and  no  ultimate  intere.-^t,  a\\\\  liis  nature 
demaiid>  wiriely  antl  recreation  ;  but  the  e(]ui\-alent 
in  satisfaction   which   he   feels   he   has  a  risjht  to  de- 


142  The  Bargain  Theory  of  Wages. 


mand  for  these  disutilities  does  not,  as  a  rule,  meet 
all  the  wants  in  his  scale.  The  laborer,  except  per- 
haps in  the  lowest  grades  of  society,  has  a  great 
variety  of  wants  and  will  naturally  seek  to  satisfy  as 
many  of  them  as  possible.  Since  his  single  source 
of  satisfaction  is  the  wages  he  receives,  he  will  there- 
fore endea\-or  to  get  as  high  a  price  for  his  labor  as 
he  can.  Thus,  though  he  enters  the  labor  market 
with  a  definite  estimate  of  what  he  is  worth,  his  esti- 
mate is  a  minimum  only. 

The  value  of  labor  will  generally  be  determined 
neither  at  the  one  estimate  nor  at  the  other,  but 
somewhere  between  the  tAvo  estimates,  in  a  kind  of 
debatable  ground,  as  it  were.  The  practical  wages 
problem  is  the  delimitation  of  the  frontiers  of  the 
respective  territories  of  Capital  and  Labor.  What 
the  result  is  of  the  dispute  for  this  territory  depends 
on  circumstances.  Eacli  strives  to  engross  the 
whole  of  the  disputed  territory  and  probably  neither 
could  be  wholl}-  successful.  The  issue  dci)ends  on 
the  relative  strength  of  the  contestants — on  the  weak- 
ness of  one  as  much  as  on  the  strength  of  the  other; 
and  the  issue  cannot  therefore  be  determined  before- 
hand. We  lia\'e  here  a  failure  of  the  equation  of 
exchange.  We  can  sa}-  only  that  wages  will  be  de- 
term,!  ned  somewiierc  bet wev:n  the  limits  b\'  the  com- 
par,iti\"c  strength  and  knowledge  of  the  bargainers. 
Tlic  limits  are  not  absolutcl}-  fixi:d  ;  but,  within  the 
un^'lisni;  L'jd  and  permanent  frontiers,  each  is  com- 
i)arati\"e!y  free  from  the  danger  of  aggression,  nrit 
perr.ajis   on    accrduit   iA   a   recignition    of   his   rip^hts 


The  Debatable  Ground.  143 

within  these  hinits  l)iit  011  account  of  the  special 
fierceness  of  the  resistance  to  a_L;L;i'essi(jn.  The  ein- 
j)k)\-er  win  fnul  i;reat  tlitricuhy  in  forcin*^"  the  hilxjrer 
to  accept  les.s  th.in  he  thinks  he  is  wortli;  and  the 
hiborer  will  tiiul  social  ami  economic  foi'ces  of  c;reat 
stren;;th  arrayed  aL;ain^t  him  slnjuld  he  attem})t  to 
exact  more  than  his  labor  is  really  worth  to  his  em- 
ployer. l)iit  the  distribution  of  the  margin  between 
the  two  estimates  can  ne\"ei'  be  rcL^arded  as  fmal. 
\  p(_)sition  may  be  occujjied  b}'  labor  in  one  year 
from  which,  in  the  next,  it  ma\"  be  f(;rced  to  retire; 
and  the  outposts  of  the  employer  ma\-,  at  tinies,  be 
thrown  farther  forward  than  the\'  can  be  permanently 
nicuntained.  Shoukl  the  stren!_;th  of  one  part\"  be 
ctnisiderabh'  <;'reater  than  the  stren;^"th  of  the  other, 
from  whatever  cause,  the  larger  part  of  the  debat- 
able in'ound  may  j)ass  into  the  hands  of  that  party; 
and  when  the  strength  of  the  two  parties  is  nearl\' 
equal,  the  debatable  land  will  be  nearh'  etpially 
di\'ided  between  them;  but  no  arraUL^ement  is  fmal. 
It  is  probable'  that,  owIul;  to  \-arie)US  causes,  the 
limits  claimed  1)\'.  and  allowed  to,  labor  are  being 
steadil}'  pushed  forward  year  by  }-ear ;  but  the 
laljorer  is  })robabl\-  still  far  from  abs(jrbinL;'  the  wl^ole 
of  the  debatable  i^'round  because,  as  we  shall  see, 
aiul  as  we  ha\'e  seen,  thouL;'h  tile  fact  was  othei-\\ise 
expres;-ed,  the  rise  of  the  lalxn'er's  estimate  renders, 
throii;^h  the  ;j;realer  efrieieucx-  that  L;L'nei-.dl\-  folli>w"s 
hiL;her  waL;'es,  pos.-^ible  a  rise  of  the  em[)loyer's 
estimate. 

It  is  necessar\'  to  C()nsider  more   fulh"   the  nature 


144  TJic  Bargain  Theory  of  Wages. 


of  these  two  estimates  between  which,  as  limits, 
actual  wages  are  determined  and  to  discuss  the  fac- 
tors which  strengthen  or  weaken  the  position  of  the 
laborer,  or  the  employer,  as  a  bargainer.  Some  of 
these  elements  and  factors  are  of  so  great  import- 
ance that  the  discussion  of  them  must  be  deferred, 
and,  in  the  remainder  of  this  chapter,  the  less  im- 
portant only  arc  considered,  though  the  place  of  the 
more  important  is  indicated. 

The  laborer's  estimate  must  not  be  taken  as  merely 
the  equivalent  of  his  standard  of  subsistence,  how- 
ever broadly  this  conception  may  be  interpreted. 
The  standard  of  subsistence  is  not  even  an  adequate 
objective  representation  of  the  laborer's  estimate  of 
his  labor,  for  this  includes,  both  the  utility  of  the 
reward  and  the  disutility  of  the  labor.  The  utilities 
afforded  by  the  reward  may,  through  the  necessities 
of  the  laborer's  position,  be  so  intensified  that  the 
sum  of  them  may  the  more  quickly  counterbalance 
the  disutilities  of  labor.  The  Irdjorer's  estimate  is 
simply  his  demand  that  in  the  reward  he  may  find  a 
sufficient  recompense  for  the  \'arious  discomforts 
and  incon\-cniences  he  incurs  in  working,  and  in 
working  at  tlic  l^idcHng  of  another.  If  the  disutili- 
ties of  lal)or  diminisli,  owing  to  shorter  hours,  or 
better  sanitar\'  conditions,  for  instance,  the  laborer 
might  be  ready  to  accept  a  l()wcr  reward  because  the 
necessary  recompense  need  not  be  so  great ;  though 
this  event  is  hardly  likely  to  occur.  He  miglit  also, 
come  to  estimate  the  utilities  of  the  reward  more 
highly  owing  to  a  general  intensification  of  his  wants, 


The  Laborer  s  Estimate.  145 


or,  owing  to  the  greater  clie;i[)ness  of  consumpti<^n 
goods,  he  may  find  the  eciuation  of  utiht}'  aiul  dis- 
iitiht}'  in  a  smaller  wage.  The  social  aiul  indus- 
trial tendenc}-  is,  h()we\'er,  in  the  opposite  direction. 
The  ecpiation  is  found  in  a  higher  wage;  for  the  dis- 
utility of  labor  is  probabl}'  increasing  while,  owing 
to  greater  chea])ness,  the  marginal  utilities  of  the 
commotlities  which  make  the  reward  are  decreasing 
and  a  larger  amount  of  them  is,  therefore,  necessary 
to  pro\ide  the  recompense  for  the  disutility  in- 
curred. 

The  standard  of  comfort  represents  one  element 
onI\-  in  the  disutility  of  labor,  though  that  element 
is.  and  is  likely  to  remain,  the  most  important  ele- 
ment. It  corresponds,  in  a  certain  measure,  w  ith  the 
aniount  of  energ\'  ex})ended  in  labor  and,  therefore, 
affords  us  an  objecti\'e  measure  of  the  principal  con- 
stituent of  a  somewhat  shifting  conception.  It  can- 
not be  taken  as  e([uivalent  to  the  laborer's  estimate 
f(M'  it  takes  no  account  of  the  moral  disutilities  of 
lal:)or.  W'e  must  take  into  account  the  effect  of 
woi'k,  and  es[)eciall\'  c^f  work  at  the  bitlding  of  an- 
other, on  the  mind  and  feelings  of  the  laboi'er.  The 
feeling  of  dependence  and  the  sense  of  the  irksome- 
ness  of  restr.iint  and  control  do,  indeed,  ma]<e  de- 
manils  on  a  maiTs  energ\-.  and  this  cx[K-nditui\'  must 
be  made  uj);  but  the  eciuiwalent  of  the  [)lu'sical  en- 
ergy e?<peniled  would  not  be  reg.irded  as  a  sulficient 
pfiCuiiuiii  (Uj't'i'tioiiis.  The  laborer's  e>timate.  un- 
doubtedly, includes  this  pureK'  subjectix'e  element; 
and.  in  one  sense,  the  laborer's  estimate  is  individual 


146  Tlic  Bargain  TJicory  of  Wages. 


and  subjective.  It  is  his  own  estimate  of  what  he 
is  worth  in  his  own  eyes,  not  necessarily  of  what  he 
is  worth  to  an  employer.  But  his  estimate  is  really 
no  more  individual  and  subjective  than  he  is  hi-m- 
self."  His  estimate  is  framed,  as  his  opinions  are 
framed,  after  the  model  of  the  opinions  of  others. 
If  he  lives  aniong  men  \\\\o  value  themselves  and 
their  self-respect  highly,  his  estimate  will  be  high. 
He  will  not  accept  employment  which  brings  social 
disapprobation  except  for  an  additional  compensa- 
tion ;  and  there  are  some  occupations  in  which  he 
will  engage  only  under  compulsion,  and  to  which, 
under  no  circumstances,  will  he  allow  his  children  to 
be  apprenticed  and  trained.  What  he  regards  as  a 
degrading  occupation  he  will  leave  severely  to  those 
whose  self-respect  is  less.  Consequently,  it  is  not 
in  the  most  disgusting  occupations  that  the  highest 
wages  are  paid  ;  but  a  butcher's  assistant  will  receive 
more  than  a  grocer's.  His  estimate  is  framed,  as  we 
said,  on  the  model  of  the  estimate  A\-hich  others  have 
formed,  and,  more  particularly,  on  the  estimate 
which  the  employer  has  formed.  If  he  is  worth  so 
much  to  his  em})lo\-er.  Ids  self-respect  v.ill  not  allow 
him  to  estimate  himself  at  less.  In  his  employer's 
estimate,  in  so  far  as  he  kno\\-s,  or  thinks  he  knows, 
what  that  is,  he  has  an  assurance  of  his  merits  which 
his  own  conce[)tion  alone  could  not  gi\'e;  and  he 
ma\'  accept   the   emplo\-er's    estimate   so    implicitly 

'^  Cp.  Spinoza  Kthica,  part  iii.,  jirop.  57  et  Schol,  Quilibet  unius- 
cuiust/ui  iitd'iiid'ui  affn/ns  ao  affcitu  alLritis  tantuin  discrcpat  quan- 
tum essentia  tinius  ah  essentia  ir'teriu-  ili ffert. 


TJic  Laborer.^  listitnatc.  147 

that  it  never  occurs  U)  him  tliat   his  subjective  esti- 
mate is  an  adopted  one. 

Strictly  speaking,  this  estimate  is  not  represented 
by  an  amount  of  commodities  but  l)y  that  amount 
of  coriinioditii's  which  wiU  afford  an  e(|uation  of 
utiht\-  and  (h's-utiht)' ;  and  tlie  e(iuation  may  Ije  dis- 
turbed eitlier  b\'  intensifx-in;.;'  or  by  rechicin;^'  tlie 
laborer's  wants  and  necessities;  or  by  increasini^  or 
b\-  decreasing"  the  disutility  (.;f  labor.  iMthou.;^]!, 
tluM'efore,  the  laborer's  estimate  cannot  be  reL;'arded 
as  an  absolute  minimum,  at  any  given  time,  or  ex- 
ce[)t  in  a  purely  formal  sense,  it  has  a  determining 
power.  The  standard  (jf  s'ubsistencc,  ho\ve\'er  in- 
terpreted, is  simply  an  amount  of  commotlities  and 
there  is  no  reason  why  the  amount  of  comiiKxlities 
a  man  has  been  in  the  habit  of  constniiing  should 
determine  his  wages  unless  it  be  that  the  standard 
of  subsistence  is  simpl\'  a  rough  and  ready  (but  in- 
complete, though  e>bjecti\"e)  measure  of  the  disutilit}' 
of  laboi'.  In  this  sense,  the  standard  is  a  determi- 
n.ant  because  the  disutility  of  labor  must  be  coun- 
terbalanced, and  miM'e  than  counterbalanced,  by 
the  utilities  which  the  reward  affords.  It  is  not  a 
final  determinant,  ho\\-e\'er,  ex'cn  of  the  minimum 
wage  l)ecause  circumstances  niav  alter  and  a  new 
eipiation  be  necessai'w  An  establishid  equation, 
liowe\'er.  is  n^t  readih'  altered,  ami  thri  >u;,';liout  all 
ch.mges  C'-'rtain  t;lements  remain  faii'l\-  perm.ment. 
The  expenditure  of  plu'-ical  cMiergx'  is  neai'l\-  C' wi- 
stant.  and  the  standard  df  comfort  is  that  amount 
of  utilities  normall\-  necess;ir\-  to  meet  this  constant 


148  TJic  Bargain  TJicory  of  Wages. 


element  in  the  disutility  of  labor.  The  standard  of 
comfort  is.  therefore,  the  most  important  element 
in  the  hiborer's  estimate  and  gives  to  that  estimate 
much  of  the  resisting  power  which  it  has.  The 
laborer's  estimate  is  not,  except  in  form,  a  minimum 
below  which  wages  cannot  fall,  but  it  has  great 
power  of  enforcing  itself.  If  the  equation  between 
utility  and  disutility  is  not  established,  the  laborer's 
sense  of  fair  play  is  wounded  and  his  ^\■ork  will  suffer. 
His  efficienc}-  depends  almost  as  much  on  his  willing- 
ness as  on  his  physical  strength  and  dexterity,  and 
the  emplo\'cr  who  tries  to  reduce  wages  in  his 
anxiety  to  increase  his  surplus  of  the  product  may 
easily  defeat  his  own  ends.  The  strength  of  the 
laborer's  position  depends  greatly  on  this  necessary 
weakness  of  the  employer  for,  though  theoretically 
the  employer  has  the  laborer  at  his  merc\'  owing  to 
the  necessities  of  li\'ing,  practically  he  dare  not  push 
his  adx'antage. 

The  laborer's  estiniate  is,  as  we  said,  an  equation 
of  two  factors,  the  disutility  of  labor  and  the  utility 
of  the  reward.  br)th  of  which  are  subject  to  inde- 
pendent wu'iations — though  the  latter  more  so  than 
the  former. 

The  disutility  of  labor  is,  on  the  whole,  increasing. 
Many  of  the  disagreeable  features  of  modern  indus- 
try are  preventable  and  are  likely,  by  an  extended 
application  of  the  principles  of  the  factory  acts,  to 
be  pre\'ented.  It  is  significant  that  the  Avorst  abuses 
of  modern  industr}-.  those  which  most  surely  destroy 
the  health  and  the  cfficienc\-  of  the  worker,  are  most 


The  Disutility  of  Labor. 


149 


prevalent  in  those  industries  wliieh  ha\'e  la<^^ed  be- 
hind in  the  inchistrial  dexxlopnient.  The  modern 
parallel  to  the  iniquities  of  the  earl)-  faetory  system 
is  found  not  in  the  faetory  industries  but  in  home 
industries;  and  this  faet  is  so  notorious  that  the 
more  adwanced  of  labor  ad\'ocates  propose  practi- 
call\-  that  home  industr\-  should  be  sup})ressed  by 
law.  The  impro\-ement  of  sanitary  ct)nditio!is  and 
the  shorteninL(  of  the  hours  of  labor  effeeted  by  the 
factory  acts  ha\e  probabh'  diminished  the  disutilities 
b}-  a  <4re<iter  amount  than  tlie}'  ha\'e  been  increased  by 
the  s[)eedin_i;  of  machiner\-  and  the  intensification  of 
work  which  hax^e  accompaiiied  these  ameliorations  of 
the  conditions  of  labor;  and  ha\'e  perhaps  rendered 
the  speeding- economical!}'  possible."  It  is  certainly 
an  open  question  whether  the  expenditure  of  energy 
demaniKxl  from  the  labor  in  industry  is  iiicreasing 
or  deci'easiiig ;  for  o\-er  against  the  optimism  of  those 
L't(q)ists  who.  looking  foi'ward,  see  labor,  by  means 
of  short  hours  and  wiried  occupations,  becoming 
pleasaiU  and  in\'oK"ing  no  disulilit}-,  but  perhaps 
e\'en  a  ])(^sili\-e  utility  as  affording  an  exercise  for 
our  powers,  we  must  place  the  pessimism  of  J.  S. 
Mill.  wh(^  was  inclint.'d  to  dcniljt  whether  machinery 
had  lightened  human  lal)or. 

Thi-^  uncei'tainty  exists  on]_\-  in  reference  to  the 
positi\'e  (lisutililies  of  laljoi',  if  the  [)ai'adf>xical 
])hrase  ma}"  be  permitted:  for  th.ere  can  be  no 
doul)t  that  the  negati\-e  disutilities  are  increasing. 
These    ari-e    out    i)f    the    (U-pmdcnce    of    the    hired 

*  Nitliolson,  I-'.ffiit.:  of  M.^.chiiury  o>i    W'a^cs,  p.  4S. 


150  TJic  Bargain  Theory  of  Wages. 


laborer  on  his  emplo}'er  and  the  widespread  feeling 
that  in  working  at  the  bidding  of  another  something 
of  the  full  stature  of  manhood  is  lost.  This  feeling 
is  a  wages  factor  of  increasing  importance.  The 
socialists  ha\'e  all  along  denounced  vehemently  what 
they  call  wage  slavery;  and  the  ardor  of  the  apostles 
of  "  pure,"  or  producer's  co-operation,*  is  inspired 
by  the  same  idea.  The  idea  that  there  is  something 
rather  degrading  in  being  a  wage  earner  has  been 
fostered  by  the  more  zealous  advocates  of  profit 
sharing,  like  ]\Ir.  Sedley  Taylor,  who  speaks  of  the 

moral  gain  to  the  workman  in  passing  from  the 
position  of  a  mere  wage  earner  to  that  of  an  associate 
in  profits.  "  +  Whatever  the  attitude  of  the  working 
classes  towards  these  schemes,  there  can  be  no  doubt 
that  the  negative  disutilities  of  labor  are  of  great 
importance  in  the  wages  c|uestion,  and  that  with  the 
spread  of  education,  in  the  narrower  and  in  the  wider 
sense,  and  the  growth  of  the  political  power  of  the 
working  classes,  they  will  become  of  more  and  more 
importance.  The  greater  the  self-respect  of  the 
laborer  the  greater  will  be  his  estimate  of  the  dis- 
utility of  labor,  and  the  higlier  v/ill  the  lower  limit 
of  wages  stand. 

The  other  factor  in  the  equation  which  gives  the 
lower  limit  is  the  utilities  afforded  by  the  reward  of 

*  The  iileal  of  Producer's  Co-operation  is  "  tliat  tlie  v.'orker  shall 
be  elevated  to  tlie  position  of  partner  and  piroiit  sliarer  instead  of 
being  tlte  hired  machiiie  of  the  capitalist  and  consumer." — Mr.  Ciray, 
Secretary  of  the  Co-opicration  Union,  fjuoted  by  Schloss,  Industrial 
I\i!?n(i!c-ralio)i ,  p.  202. 

\  Ki'purt  oj  Industrial  Rcnntncraticn  Co)ifcrciicc,  p.  256. 


The  rtilitv  of  tJic  Rnoard. 


151 


labor.  A  !4i\-cn  aniouiit  of  satisfaction  may  be 
obtained  from  the  satisfaction  of  a  few  wants  of 
L;reat  intensity  or  from  a  Iari;er  number  of  less  in- 
tensity. It  is  possible',  therefore,  that  an  intensifi- 
cation of  the  cKnientar\-  i)h}'>ieal  aiul  human  wants 
n)a\-  induce  the  indi\-idual  to  tuul  the  e([uation  of 
utility  and  tlisutilil\'  in  a  smaller  amount  ot  54'oods. 
Such  an  inten>itlcation  of  the  elementary  wants  is 
of  tretjuent  occurrence,  and  \\hene\'er  it  does  occur 
the  laborer  will  put  forth  more  effort  to  obtain  the 
satisfaction  than  he  [)uts  forth  at  other  times.  l"he 
skilled  artisan  who  is  compL'Ued  t<^  take  relief  work 
pro\'ided  ior  the  unem[)lo\-ed  does  not  wdue  himself 
the  less  Ijut  the  reward  the  more;  ;ind  the  widowed 
mother  will  slax'e  for  a  pittance  to  keep  her  children 
from  star\'iipL;".  In  ciuiiparison  with  their  ne'cessities 
tluw  see'in  to  pkice  no  \'alue  u[)(mi  their  work'.  On 
the  other  IkuiiI,  the  f^ulher  a  man  is  from  the  daav.^er 
of  starxMtion,  the'  k-ss  will  be  the  marginal  utility  of 
the  reward,  and  the'  sooner  will  he  find  that  the  dis- 
utilit\-  of  woi-kin;_^'  exceeds  the  utilit\'  of  the  reward, 
and  the  hi^lu'r,  therefore,  the  waives  which  must  be 
oftei'ed  to  induce  h.im  to  work.  Moreo\-er  unto  him 
that  hath  shall  be  _u,"i\-en  ;  and.  the  d.ewlopmeiit  of 
the  purel}'  human  wants  will  increase  the  ne;j;ati\'e 
disutilitiL's  of  labor,  m  'ilcin;,;"  dependence  more  irk- 
some an.d  tlie  saciatice  of  leisure  more  un.i;^r,iteful. 

'I'he  intiix-idiual  laborer  is  not,  nece^r-ai'ilw  de- 
pe;ident  on  hi,>  iudivadual  ei-timate.  d'r.e  lower 
limit  which  he  set^,  or  wnuld  >et,  for  himself  is 
often   >uper.--Ldei_l  by  ail   artificial    lo',\er  limit  set  by 


152  TJic  Bargain  Theory  of  Wages. 


the  industrial  condition  of  the  community  in  which 
he  Hves.  In  new  countries,  agriculture  and  the  ex- 
tractive industries  set  the  standard  of  wages,  and  the 
wages  in  these  occupations  form  a  minimum  below 
which  the  wages  in  other  industries  cannot  fall. 
This  was  one  of  the  first  laws  of  wages  to  be  enunci- 
ated, and  subsequent  observation  has  corroborated 
Benjamin  h^ranklin's  statement  (though  not  his  in- 
ference) that  "  no  man  who  can  have  a  piece  of  land 
of  his  own,  sufficient  by  his  labor  to  subsist  his 
family  in  plenty,  is  poor  enough  to  be  a  manufacturer 
and  work  for  a  master."  -  His  inference  that 
while  there  is  land  enough  in  y\mcrica  for  our 
people,  there  can  ne\-er  be  manufactures  to  any 
amount  or  wilue,"  has  been  hotly  contested  by  the 
protectionists  and  was,  in  effect,  condemned  by 
Adam  Smith.  +  The  competition  of  rival  nations 
in  foreign  trade  has  a  similar  tendency  to  create 
such  an  artificial  lower  limit  in  all  countries,  but  the 
tendency  is  not  so  strong  in  this  case  because  of 
the  greater  immobility  of  labor.  In  a  new  country 
every  man  thinks  he  knows  enough  to  be  a  farmer; 
and  the  readiness  of  access  to  the  land  imprru'cs  the 
laborer's  standing  not  mcrcl\'  by  reducing  the  sup- 
pi)-  of  hired  laborers  but  also  by  remo\-ing  some  of 
the  disabilities  which  might  make  the  laborer,  owing 
to  the  intensit}'  of  his  e!emcnt;iry  M'ants.  hnd  the 
equation  of  utilit\-  and  disutility  in  a  smaller  quan- 
tity  of   commodities.      While   a  man   "  can   have  a 

*  lieiijaiiiin  Franklin,    Wcrl.-s,  vol.  iii.,  p.  loS. 
\   ll'i-alih  ./  Xations,  bk.  4,  cliaj).  i. 


An  Artificial  Lon'cr  Limit. 


153 


piece  of  land  of  his  own,"  the  elementary  wants  arc 
not  likel)- to  be  much  in  evidence;  and  the  freedom 
and  indejK-ndence  of  the  farmer  render  the  de- 
pendence of  the  hired  laborer  more  odious  and 
unwelcome.  As  the  country  fills  up,  the  laborer 
has  to  (k'pctid  more  on  himself  and  on  his  own 
estimate.  This  does  not  mean,  as  '-'ranklin  su;^- 
;4ests,  that  wau,"es  must  fall  as  the  nation  becomes 
industrial.  Indeed,  the  effect  is  _^enerally  in  the  op- 
posite direction  because  the  (le\"eloj:)ment  of  manu- 
factures creates  new  wants;  and  the  creation  of 
new  wants  means  that  the  laborer  must  recei\'e 
a  larii^cr  amount  of  commodities  to  establish  the 
equation  of  utility  and  disutilit}-.  But  whether  the 
new  natural  limit  is  hi<;'her  or  lower  than  the  old 
artificial  limit,  the  laborer  has  now  to  depend  upon 
himself  alone. 

The  upper  limit  of  waij^es  is  the  employer's  esti- 
mate of  what  the  laborer  is  worth  to  him  ;  and,  since 
the  payment  of  waives  is  not  an  exercise  of  philan- 
throp\-  and  the  emi)Ioycr  is  elri\en  thereto  by  no 
plnvsical  necessit\-,  but  impelled  b}'  a  purel\-  eco- 
nomic !noti\'e,  it  is  likfh^  to  be  both  more  definite 
and  more  absolute  than  the  laborer's  estimate.  It 
is  more  definite,  becairsc  the  emplr^}'er  is  less  liable 
to  be  i:;;o\-erned  by  the  peculiarities  of  his  per-onal 
teelin;j;s  and  more  read)'  to  accept  the  L!,uidance  of 
his  fellows  who  are  at  least  as  aljle  to  make  an 
estimate  as  himself  and  are  more  :inimated  b\-  the 
same  moti\x'  as  lie  is.  Tlie  labeirer  has  to  form 
his   estimate   bv   reference   to    the    sonu;\\hat    x'aLnie 


154  ^/''^'  Bargain  Theory  of  Wages. 


and  subjective  ideas  of  utility  and  disutility  while 
the  employer  can  make  use  of  the  "  calculation  form 
of  utility."  It  is  true  that  he  has  to  calculate  in 
anticipation  the  price  he  can  obtain  for  the  fruits 
of  the  labor  he  purchases,  and  there  is  thus  a  pos- 
sibility of  error  in  his  calculations;  but  given  the 
price,  he  has  to  do  little  more  than  calculate  the 
efficiency  of  the  individual  laborer  which  he  can 
readih'  measure.  The  upper  limit  is  more  absolute 
than  the  lower,  because  the  employer  has  a  stronger 
conxdction  that  his  estimate  is  just  and  accurate; 
for  in  this  assurance,  he  will  be  able  to  offer  a  more 
effective  rcisistance  to  any  attempt  to  raise  wages 
above  this  liniit. 

As  already  explained,  the  upper  limit  is  regarded 
by  the  emi)loyer  as  a  maximum;  and  if,  as  must  be 
the  case  when  labor  is  to  be  br)ught  and  sold,  the 
buyer's  cstim.'ite  is  higher  tlian  the  seller's,  the  only 
reason  why  tlit;  emplo)-er  should  pay  the  maximum 
is  that  he  can  pay  it;  and  this  lie  is  not  lil^el^'  to  pay 
until  he  is  forced.  Ihit  the  fact  that  he  can  pay  up 
to  the  limit  is  an  element  of  weakness  in  his  po-ition 
as  a  bargainer;  and  shoidd,  at  the  same  time,  the 
po-iti')n  of  the  laborer  be  strong,  wages  ma\'  be 
forced  nearly  up  to  the  maximum.  Tliere  is  no 
other  sufficient  reason  why  he  slioukl  p;i\'  out  the 
maximum  wage.  ComoL-tition  of  ma.ster  \\'ith 
master  is  nrit  keen  enough  to  bring  about  tliis  re- 
sult; and,  besides,  the  effect  oi  competition  is  set 
aside  b\-  the  tacit  or  a\'o\ved  combinati;in  of  masters 
to  ])a\'  a^  \n\y  wage's  ;is  is  rornpatilile  with  t.:rf)cienc\', 


TIic  liiiiploycr  s  listijiiatc.  155 


and  by  the  fact  that  tlic  dc\'ch)i)inciit  of  the  capi- 
talist rc\L;iiiie  has  ci'eatetl  a  sui'[)kis  of  irrei^uhuiy 
cinpl()\-ecl  lahi)r  011  whicli  much  of  tlie  force  of  tlie 
coini)etitit  in  between  rna-ters  fcjr  hibor  i.->  ilis>ipatech 
In  fact,  a[)art  from  the  power  which  the  hiburers 
ha\'e  of  I'nfDrcin^^-  their  (lemands,  tliere  is  no  reason 
tosuppo-^e  tliat  the  employer  will  williii'^l)'  pa\'  as 
much  as  lie  can.  Rather  does  he  endea\'or  to  })ay 
as  little  as  he  ma\' ;  and  he  respects  the  laborer's 
estimate  on!)'  because  of  the  effect  A\'hich  an  out- 
raged sense  of  justice  has  on  efficiency. 

IIowe\x'r  powerful  the  laborer  is,  \vc  ma}'  practi- 
cally ret^ard  this  upper  limit  as  a  final  and  unsur- 
niDuntable  obstacle  to  the  rise  of  wa_L;"es.  The 
cm[)l<)ycr  can  p;iy  UK^re  to  lab^)r  onl\-  by  pa\'in_t^  less 
to  the  otlua'  chiimants  foi'  a  share  i)f  the  product  and 
this  would  in\"ol\-e  a  readjustment:  ^\dlicll  is  a  task 
he  is  not  likel\-  to  >eek'  to  undertake.  lie  ma\-  be 
forci^'d  b\'  nece.^.a'lw  or  b\'  tile  pre:>arre  of  public 
opinion,  to  un.lertal^e  it;  but,  siiice  caie  of  these 
claims  is  his  own,  a.nd  all  are  made  b\'  men  (;f  his 
own  clas>  and  standin;^,  it  will  reouire  a  \'ery  ^"reat 
{pressure.  Labor  it  is  natural  for  him  to  rei^'ard  a,s 
the  ;i;^'ent  which  should  be  sacrificed  for  the  in- 
tcL^^rit}'  of  the  others;  and  it  would  be  a  reversal  of 
all  his  class  and  bu-^iness  })reconce[)tions  to  thinly  of 
rediucin;^'  the  sliares  of  the  other  claim:ints  to  increase 
the  share  whicli  '-^oe-^  to  labor.  d'iie  w  idu:  acce})t>ince 
of  the  doctrine  of  a  li\-in;^'  w.iL;"e  siiows  that  there  is 
a  _L,M'owin'^^  belief  that  the  w;iL;e>  of  labor  should  be 
reL;cirilL-tl  a.-,  a  iir:,t  char_^_^e  on  the  pr(jduct  of  industry, 


156  TJie  Bargain  Theory  of  Usages. 


and  the  meaning  of  this  is  that,  in  the  opinion  of 
many,  the  employer,  if  necessary,  should  face  the 
difficulties  of  readjusting  the  claims. 

If  this  readjustment  cannot  be  effected,  the  suc- 
cess of  the  laborer  in  raising  wages  above  the  em- 
ployer's estimate  would  result  in  a  restriction  of 
industry  unless  there  were  some  way  open  to  the 
employer  to  neutralize  its  effect.  There  is  one  ob- 
vious way  in  which  he  can  render  a  demand  ineffec- 
tual which  he  is  not  strong  enough  otherwise  to 
resist.  The  law  of  substitution  "'•■  is  especially  appli- 
cable as  between  capital  and  labor;  and  the  strength 
of  the  laborer's  demand  may  be  turned  aside  by  an 
increased  use  of  fixed  capital.  Machinery,  at  least 
to  a  very  large  extent,  can  be  made  to  do  the  same 
work  as  labor;  and  labor-saving  machinery  is  most 
used  where,  as  in  America,  wages  are  high.  The 
immediate  result  of  the  substitution  of  capital  for 
labor  is  to  reduce  the  demand  for  labor,  and,  there- 
fore, to  weaken  the  laborer's  position;  and  it  is  the 
immediate  result  only  which  is  of  importance  in  this 
connection.  The  law  of  substitution  thus  operates 
frequently  to  render  concession  to  the  demands  of 
labor  unnecessary.  When  the  law  of  substitution 
is  not  operative,  and  there  are  still  many  industries 
in  which  l;iiJor-sa\'ing  machinery  cannot  be  used  in- 
stead of  labor,  a  successful  demand  for  \\-ages  higher 
than  the  cmi)loyer's  limit  will  restrict  industry. 
For  a  genei'al  readjustment  of  the  distributed  sliares 
will  occur  only  when  the  demand   for  higher  wages 

*  Cf.  Marshall,  Pri>iciphs  of  EiO)ionncs,  passim. 


TJic  Lazo  of  Substitution.  157 

has  been  successful  over  ;i  lar^c  ;ire;i ;  and  success  in 
those  inclu.-.tt"i(.s  where  the  law  of  substiUiUon  is  not 
oi)erati\'e  is  not  cnou^li  to  force  a  ^^eneral  readjust- 
ment. AecortHnid)-.  a  demand  which  recjuires  a 
readjustnu'iit  \\-iU  l)e  neutrah/.ed  in  most  industries 
b\-  the  law  of  substitution  and  in  the  otluirs  will  result 
in  a  re-trietion  cither  of  profits  or  of  emplo\-mcnt, 
or  ultimatcK'  of  both. 

It  may  be  su;^L;ested  that  where  the  law  of  substi- 
tution does  not  protect  the  emi)loyer,  there  is  a  cer- 
taiii  compensatiou  for  the  hiL;her  wages  which  will 
pre\'ent  the  restriction  of  industry.  The  working 
classes  form  the  great  niajority  of  consumers,  and 
their  increased  spending  power  may  make  it  profit- 
able to  introduce  imj)ro\'ed  processes  of  production. 
Ikit  unfortunatel)'  for  the  employers  ^\■h(»,  debarred 
b\-  the  natui'c  of  their  industry  from  using  the  law  of 
substitution  in  their  own  defense,  ]ia\"e  been  forced 
to  pay  higher  wages  than  the\'  consider  they  can 
affi^ird,  the  increased  demand  for  commodities  will 
probably  not  affect  the  industry  which  they  are 
engaged  in  before.  It  is  in  the  highest  skilled 
tratles,  mainl}-.  wliere  artistic  w<^rkmanship  is  re- 
quired, that  machinei'}-  cannot  be  introduced  as  a 
substitute  for  human  labor;  and  the  deniand  (^f  the 
working  clas-es  for  the  product  of  these  industries 
is  small  and  is  liixe!)',  in  s))ite  of  an\"  po-;sil)le  in- 
crease' of  wages,  to  remain  snialk  'Die  demand  of 
the  working  classes  i-.  foi'  C' >mmodiiir-<  prnduced  in 
tho-e  iiidu-^tries  whei'e  the  law  nt  sul-'-t it ut ion  is 
operatiw.      Accordingly,    the   c;  Migien-^ation    to    the 


158  The  Bargain  Theory  of  Wages. 


unfortunate  employer  who  has  been  forced  to  pay 
higher  wai^^es  than  he  can  afford,  is  found  only  in 
that  increased  i^r^neral  prosperity  which  tends  to 
follow  from  a  permanent  increase  in  the  demand 
for  the  products  of  any  industry  or  group  of  indus- 
tries. The  compensation,  therefore,  if  not  highly 
problematic,  is  at  least  very  indirect. 

We  ma\-  conclude,  then,  that  the  employer's  esti- 
mate is  practically  a  fixed  and  constant  maximum. 
The  attemi)t  to  raise  wages  above  this  limit  will 
rarely  be  successful  and,  in  those  industries  where  it 
may  be  immediately  successful,  rejoicings  are  prema- 
ture. The  endeavor"  o'erleaps  itself  "  and  restricts 
employment;  and,  in  a  short  time,  the  emplo\'er's 
estimate  will  be  re-established  more  firmU'than  ever 
as  the  up})er  limit  of  wages. 

The  employer's  estimate  of  the  value  of  labor  is 
the  result.'int  of  two  factors,  the  amount  which  the 
laborer  can  produce  and  the  resources  at  the  com- 
mand of  the  employer.  The  first  of  these  factors 
is  so  obx'ious  that  the  Productivit}'  Theory  was  based 
on  the  neglect  of  the  second.  The  W'agesT^^und 
Theory  undoubtedly  u'ent  to  an  extreme  in  the  im- 
portance it  attached  to  this  second  factor,  but  it 
rightlx'  emphasized  tlie  fact  that  the  emplo\'er  is 
limited  b\'  the  actual  res')urces  ;it  his  command  in 
the  amount  tliat  he  can  offer  f')r  labor.  15y  this 
wc  mcc'in  not  1)\'  the  resources  of  any  ca<urd  indix'id- 
ual  who  ma\',  rightly  or  wrfMiglx',  aspii'e  to  be  an 
em])lr)yer,  but  by  the  resoui'ces  of  the  marginal 
emplo\-(r:  tliat  is,  ultimateh'  b\'  the  amount  of  the 


luutors  ill  the   liiiiployir  s  listiiiiatc.  i  5'^ 


present  income  wliicli  tlie  coinnnmity  is  williii;.^  to 
cli\'ert  from  present  consiim[)tion  to  the-  lju\-i!iL;' of 
l.ihor.  The  \\'a;.M->- l-'und,  in  the  n  a  i' rower  seii^e  of 
the  resources  immeihalel}'  (inclutliii'^  credit)  at  the 
CDmmand  of  llie  emph)\'er,  e\en  though  it  be,  as  is 
asserted,  continuously  replenislied,  is  an  important 
fact  in  determining^  tlie  proper  Hmit.  The  \\'a_L;es- 
I'"und  is  a  "  Z\\ischen-reser\'oir, "  ;is  Roscher  has 
termed  it  ;  and  althoui^h  the  caj^acity  of  the  reser- 
voir is  no  measure  of  the  \'oKime  of  the  sup[)ly,  the 
situation  of,  and  the  height  of  the  water  in,  the  reser- 
voir determine  the  heiidit  to  which  thic  water  can 
rise.  The  em[)h)\'er  is  the  cHstriljutor  of  wa.g'es  and, 
althouL^ii  the  amount  of  his  resources  can.  affect 
money  wai;"es  onl\',  the  ([uestion  of  money  waL;"es  is 
the  mo.-.t  important  part  of  the  (piestion  of  real  waives. 
The  resources  at  the  dis[)osal  of  tlie  em[)loyer  in- 
clude the  ci'edit  he  can  commaaid  at  the  bank  and 
el.-^ewhei'c.  The  monetary  and  banl-cini;'  s\-stems  of 
t Ik;  C'.imm.unit \'  are  thus  of  immense  im[)ortance  to 
the  working;"  classes.  The  \'olume  <if  bu-iiiess  })eri- 
odicalK"  inci'eases;  and,  if  the  mone\'  of  the  country 
is  inelastic  and  tlocs  not  expand  in  \-olume  when 
the  volume  of  business  expands,  there  is  a  c^reat 
danj^er  that  the  \'alue  of  labor  will  j^erii  KlicalK-  de- 
C!'ea--e.  W  hen  bankiuL,''  facilities  are  r.u'e  an.d  the 
ciL'dit  sy^tL'iU  tlefecti\'e  or  unde\'elo[)ed  \-arious  de- 
\"ices  are  .idopted,  i;"enerali\'  iii  connection  with 
the  method  of  remuneration,  to  suppl\-  the  lack. 
W'cp^es  are  paid,  not  v,-eekl\-  or  fortni;.dit  1\',  but 
monthly  or  (|uarterly,  or  they  are   paid    w  holl\-  or  in 


i6o  The  Bargain  TJicory  of  Wages. 


part  in  goods  or  in  orders  on  a  store  controlled 
directly  or  indirectly  by  the  employer,  or  in  dwelling- 
houses  or  land  provided  by  the  employer;  and  the 
effect  is,  in  every  case,  to  provide  a  somewhat,  in- 
efficient substitute  for  credit  and  to  enable  the 
employer  to  do  a  larger  business  on  his  available 
capital.  The  motive,  of  course,  is  not  any  desire  to 
raise  the  wages  of  the  workmen  ;  but  were  it  not 
that  these  devices  have  serious  indirect  consequences 
for  the  laborer,  the  practice,  even  from  the  laborer's 
point  of  view,  would  be  laudable  wherever  the  credit 
system  is  not  developed.  It  is  significant  that  in 
Canada  at  any  rate  these  devices  fall  naturally  into 
disuse  without  the  necessity  of  legislation  as  the 
banking  system  expands,  and  that  the)-  are  practised 
now  only  in  back  countr}-  districts  or  by  employers 
whose  credit  at  the  bank  is  not  good.  Unfortu- 
nately, the  practice  is  attended  by  so  many  evils 
which  ^\■eaken  the  position  of  the  laborer  that  their 
influence  in  raising  wages  is  as  nothing  in  compari- 
son with  the  influence  of  their  indirect  effects  in 
lowering  wages.* 

The  upper  limit  of  wages  is  fixed  but  onh'  for  the 
time  being.  It  is  not  unchangeable  and  ma}-  rise 
and  fall  with  changes  in  industrial  circumstances. 
It  may  fall  as  well  as  rise,  although  the  progress  of 
the  working  classes  during  the  last  half  century  has 
made  the  idea  of  a  lowering  of  the  upper  limit 
strange  and  unfamiliar.       The  employer's  estimate 

*  For  a  further  discussion  of  this  question  see  Chap.  VIII.  of  this 
essay. 


Variations  of  the  ILuiploycr' s  Estimate.        i6i 


will  rise,  in  ;^^ciu;ral,  fioiii  two  causes.  \iz.,  increased 
efficiency  and  an  iinj)r()\-ed  credit  s\steni.  Tlie 
conditions  of  a  rise  of  efficiency  are  obvious  and 
lia\-e  been  in  part  already  discussed  in  the  earlier 
cha[)ters.  The  most  important,  as  well  as  the  most 
obvious,  are  the  spread  of  elenientar\'  antl  technical 
education  and  the  intluence  of  hii^h  wattes  in  im- 
proxduL^f  the  industrial  capabilities  of  the  laborer. 
Ecjuall)'  important.  thou<4"h  not  (|uitc  so  ob\'ious,  is 
the  influence  \\hich  the  lower  limit  has  on  the  upper 
limit.  Gener.dl}'  speakiuL^.  the  higher  the  lower 
limit  the  greater  the  efficienc\-  of  the  laborer.  The 
man  whose  self-respect  is  great  is  likely,  other  things 
being  the  same,  to  prcnx'  the  better  worlcman.  Uut 
this  is  true  only  in.  general,  because  a  man's  self- 
respect  is  never  so  militant  as  when  it  is  w(junded, 
and  the  attempt  to  violate  the  laborer's  self-respect 
will  result  in  a  li)wering  of  efficienc}'. 

These  limits  are.  in  the  main,  determined  inde- 
jiendenth'  of  the  influence  of  outside  causes.  The 
lal)orer  determines  the  lower  limit  and  the  emploxxr 
the  u})per  limit,  and  })ubHc  opini()n  and  legislation, 
which  have  considerable  influence  in  determining 
where  between  the  limits  actual  wages  shall  be 
fixed.  ha\"e  no  certain  and  regular  influence  on  the 
linuts  themseh'es.  The  influence  is  felt  mainlw 
where  at  first  we  should  hardl\"  expect,  in  maintain- 
ing the  ui^per  limit  higher  than  it  ought  to  be. 
This  occurs  more  fre'(iuentl\"  in  the  case  of  the 
wages  of  maiiagement  than  in  the  wages  of  hired 
labor.       The   emplo3-er,    influenced    by   the    idea   of 


1 62  TJic  Bargain  Theory  of  Jl^agcs. 


what  ought  to  be  a  H\-ing  wage  for  men  of  his  own 
class  and  rank,  frequently  pays  higher  wages  to  his 
managers  than  their  work  is  worth.  At  least  this  is 
the  conclusion  which  follows  from  the  remarkable 
fact  to  ^\■hich  !\Irs.  Sidney  Webb  has  called  atten- 
tion in  her  Co-operative  Movement :  * 

"  By  selecting  officials  and  managers  from  a  class 
without  a  conventional  and  extravagant  standard  of 
expenditure,  they  (/.  r.,  the  "  Lancasliire  Idmiteds  ") 
have  reduced  tlie  earnings  of  the  brain  worker  to  the 
level  of  his  actual  wants — to  tlie  jicrsonal  ex|)enditure 
needful  for  the  full  and  effective  use  of  his  faculties. 
The  preposterous  salaries  given  by  u]i])er  class  share- 
holders to  ujiper  class  officials — the  f\20oo  to  ^5000  a 
year  have  been  replaced  by  modest  incomes  of  ;^2oo  to 
^400  and  ap[)arently  without  detriment  to  skill  or 
integrity." 

Between  these  limits  the  value  of  labor  is  deter- 
mined b\-  the  comparati\'e  strength  of  the  bargainers. 
If  the  laborer  is  too  \\-eak  to  enforce  his  claim  the 
wages  of  lab(M-  will  be  nearer  the  lower  limit :  if  the 
laborer  is  a  strong  bargainer,  near  the  emplo^-er's 
estimate.  In  some  cases  where  organization  and 
combination  ha\-e  greatly  strengthened  the  laborer's 
position,  the  margin  of  debatable  territor\'  will  be 
almost  absorbed  by  labor;  and  this  is  probably  the 
case  where  a  trade-unir)n  minimum  wage  is  enforced. 
The  object  of  trade-union  polic}-  would  then  be  to 
force  a  general   readjustment    of   the  terms  of   dis- 

*  Ik-atrice  I'ottcr,    TIw  Co-opcratiic  Mvvcuiiit,  p.  132, 


The  luu-irainniir  Process. 


163 


tribution — a  nuicli  more  clifficult  task  than  that. 
ah"ca(l\'  acc(>ni[)Hshc(l,  of  forcin;^  waives  up  to  the 
cnipl()\-cr's  hniit  because  there  wiU  now  be  opposed 
to  forces  of  tracle-iinionisni,  not  merely  the  oljjection 
of  tile  employer  to  a  curtailment  of  his  prohts,  but 
al^o  the  re>islance  of  the  other  participants  in  the 
product  to  an\-  readjustment  which  means  a  dimi- 
nution of  theii'  shares.  It  is  impossible  to  determine 
whether,  or  h.ow  fi'L-tpient  1\',  labor  has  been  able  to 
absorb  the  margin;  for  the  em[)loyer's  maximuni  is 
definitel}-  known  onl\'  to  the  em[)loyca';  and  his 
protestations  (bec.iuse  the}-  ai'e  the  pr(»testations  of 
an  interested  pei'S(m)  cannot  be  accepted  except  at 
a   lil)eral   tliscount.      The   iluctuations   iii  the  actual 


ite  of 


waues  w  hich  ru\ 


freiiuent  th(nmh  not  \a'olent 


seem    to    foi'bid    us   to  assume   that    the   Uniri^in    has 
been   absorbed    pi^rmauent  1\-  b}'  either  part)-.      'J'he 


streiv'th    of    tli 


laborer,    thi'oc'jh    coni!)in;!tion, 


\'ery  ^^reat  ;  but  his  nece-^sit ies,  the  inikieiice  of 
which  he  eiuleaxors  to  neutralize  b\-  means  of  these 
combinations,  are  also  ve'r\-  i;'reat  ;  and  combination 
is  bein^;-  met  hy  combination. 

The  W'age's-h'und  rheor\-.  which  we  saw  {)rescnted 
the  form  of  a  recoriciliation  of  the  other  two  j^n'cat 
theoi-ii's.  states  e.\i^licitl\-  that  actual  w:iL^fes  ai'e  de- 
termined solel\-  b\-  means  of  competition.  i'h'om 
the  -^tandpi-^int  of  the  fuller  mi.;;:nin;4-  wliich  ha-  ])een 
,LM"\-en  to  the  limits  of  the  Wa;_;e--lMind  Tlieory.  it 
i~^  ob\ious  th.it  compi'tiliou  i-  not  the  onl\-  factoi' 
wliich  e!itt'rs  into  tin-  detei-mdnat  ion  of  ;u'tua!  wa;.:;'es 
between    the   liun'ts    althou'jh    u.ndr  aditL:dl\-  it   i<  one 


164  The  Ba?-gain  Theory  of  Wages. 


of  the  most  important.  The  competition  of  master 
with  master  for  hibor  tends  to  raise  wages  towards 
the  upper  limit :  the  competition  of  laborer  with 
laborer  for  work  tends  to  force  wages  down  to'the 
lower  limit;  and  the  suj^ply  and  demand  of  labor  is 
of  decisi\-e  importance  in  the  determination.  But 
com|)etition  is  not  the  only  factor  or,  at  the  best,  is 
only  a  general  name  for  the  working  of  several  fac- 
tors the  nature  of  which  requires  more  explanation 
than  is  gi\-cn  in  the  use  of  one  general  term.  The 
strength  or  weakness  of  the  laborer's  position  is 
only  in  part  determined  b}'  the  number  of  competi- 
tors for  work.  We  are  not  dealing  with  a  mere 
commodity  whose  value  may  be  completely  deter- 
mined b}-  the  more  (m-  less.  We  must,  in  the  case 
of  labor,  take  into  account  the  knowledge  which  the 
laborer  has  of  the  general  conditions  of  supply  and 
demand  and  tlie  presence  or  absence  of  that  char- 
acter and  decision  which  would  enable  him  to  take 
adx'antage  oi  his  knowledge,  of  the  strength  of  his 
own  position  and  the  weakness  of  his  emplo\-er's. 

The  strengtli  of  the  laborer  as  a  bargainer  depends 
on  his  knowledge  (A  the  mark'ct.  Other  things  be- 
ing equal,  knowledge  is  power  and  liere  the  laborer 
is  weak.  It  is  true  that  the  impr()\'enient  there  has 
been  in  the  laborer's  position  during  the  last  half 
century  has  been,  to  a  large  extent,  due  to  his 
greater  knowledge  of  the  conditions  of  the  labor 
market.  Tlie  differential  ad\-anta;,;e  \\hich  the  em- 
ployer has  alwa\'s  had  owing  to  his  greater  knowl- 
edge   and    his    wider    opportunities     for    obtaining 


Kiioi^Ic'dgc  is  Po^vcr. 


165 


information,  has  been  i^rcally  reduced  l)y  the  spread 
of  54"eneral  education,  h)'  the  (h'sseniination  of  indus- 
trial news  throuL^h  the  press,  b}-  tlie  organization 
and  federation  of  hilj(jr  union.s,  and  by  the  o[jening 
of  iiuh.istri.d  bureaus,  State  or  niunici[)al,  fcjr  the 
_L;atheriii;_;'  in  an.d  tlisseniination  of  information  rc- 
;j,"ardinL;'  the  condition  of  industry  in  ihfferent  parts 
(^f  the  counti')-.  The  tUlTerential  ad\'antai;e,  hcjw- 
ever,  still  continues  in  fa\-or  of  the  emplox'er ;  fca', 
althouL;"h  at  the  present  day  a  labor  bureau  is  re- 
L,farded  as  an  indispensable  part  of  the  administrative 
machinery  o[  every  proL^i'essive  State  or  pro\'ince, 
yet,  till  now,  the  infcM-mation  these  bureaus  have 
collected  and  [)ublished  has  probably  been  (^f  more 
service  to  the  economist  and  the  statistician  than  it 
has  been  to  the  workin;;  classes.  I;idirectl\\  no 
doubt,  throu;^h  lei^islation  promoted  in  consec^uence 
of  the  e\'idence  thus  presented,  the  interests  of  the 
laborer  ha\'e  been  ser\-etl ;  but  he  is  still  i^enerally 
either  too  i_i;'norant,  or  to(j  apathetic,  to  make  much 
direct  use  of  the  reports. 

The  laborer's  ability  to  ac(]uire  information  and 
his  alhlity  to  use  such  iiiformation  as  he  has  ac- 
cpiired,  have  sometimes  been  restricted  hx  metliods 
of  industrial  remuneration.  The  truck  system, 
which  theoreticalK"  mi'dit  ha\'e  so  man}-  ad\"antai;'es 
tor  the  wa^e  earnei',  lia^  in\'arial)ly  ser\'ed  to  liamper 
Id-  mo\-ements  aiid  to  blind  him  to  the  knowledL;'e 
of  the  actual  Condition  of  indu-ir\'.  d'he  distinction 
between  real  wa-j^es  and  mon^w  wa;^'es  is  eas\'  to 
draw   in   theor}-,  cuul   almost   inrpos.-ible   to   draw   in 


1 66  T)ic  Bargain  Theory  of  Wages. 


practice;  and  the  truck  system,  in  all  its  modifica- 
tions, has  served  to  make  it  even  harder.  Profit 
sharin<^,  and  other  methods  of  deferred  payment, 
whatever  the  moti\'e  which  inspires  them,  have  the 
same  tendency  to  make  it  more  difficult  for  the 
laborer  to  discover  where  his  real  interest  lies. 

Knowledge  is  not  power,  unless  there  is  both 
ability  and  disposition  to  make  use  of  it;  and  on 
this  account  the  employer  is  again  stronger  than 
the  laborer.  The  laborer  is  at  a  disadvantage  be- 
cause his  necessities  do  not  allow  him  to  make  use 
of  the  knowledge  he  has.  He  cannot  often,  even 
if  he  always  would,  follow  wherever  his  advantage 
calls.  The  immobility  of  the  laborer  may  be  re- 
garded as  the  crowning  disability  of  labor.  It  is 
true  that  the  emplo}'er  is  also  handicapped  by  the 
fact  that  fixed  and  specialized  capital  is  peculiarly 
immobile;  but  liis  disad\"antage  is  not  so  great  nor 
is  it  so  immediate.  Because  the  laborer  must  live 
by  his  work,  it  is  more  often  he  who  seeks  the  em- 
ployer than  the  cmplo\-er  \\\\o  has  to  follow  after 
the  laborer.  The  in"im<)bilit\-  of  specialized  capital  is 
not  a  vcr}-  great  disadvaniage  because  the  employer 
is  the  centre  of  attraction. '■■• 

E\"ery  disal:)ility  under  which  the  laborer  suffers 
weakens  his  position  as  a  bargainer  and  tends  to 
keep  wages  down  near  the  lower  limit.  Apart  from 
the  special  disad\'ant;iges  tliey  bring,  they  generally 
have  the  effect  of  weakening  ch;u'acter.      Strength 

*  Vox  the  (liscu.ssion  of  Mobility  of  Labor  see  the  two  following 
chapters. 


Factors  in  tJic  Waives  Barij;ai>i.  \Gj 

as  a  bari^aincr  corrcspoiuls.  in  scenic  measure,  with 
the  strcni;th  of  the  economic  character  of  the  bar- 
j^ainer.  lie  who  knows  his  interest  and  is  zealous 
to  pursue  it  occupies  a  strong"  position.  The  effect 
of  nianx'  ot  tlie  minor  disabilities  is  to  weaken  those 
cpialilies  which  wouUl  enal)Ie  the  laborer  to  take  ad- 
vantai;e  of  those  conditions  which  are  in  his  favor. 
The  consciousness  of  the  immediateness  of  his  ne- 
cessities. howe\-er,  pre\'ents  him  from  taking;  the 
necesScU'v  risk's  to  turn  these  C(,)nditions  to  his  ad- 
vantaq;c  and  the  fruit  that  mii:;ht  be  his.  had  he 
the  means  of  L;'atherin;j;'.  fcdls  to  his  employer. 
Character  and  decision  are  tpialities  in  which  the 
emplo\-er,  by  his  circumstances  and  his  trainiuL;.  is 
strong;,  and  conse([uentl\',  in  the  contest  of  stren_L;"th 
between  the  em[)lo\'er  and  the  employed,  the  result 
would  Li'eneralh-  be  much  in  the  fa\'or  of  the  cm- 
plo\'er  were  it  not  that  the  kdxirer,  conscious  oi  liis 
weakness  and  deficienc}'  has,  in  combination  soU!_;lit 
and  found  a  substitute  for  character. 

Trade-unionism  or  collecti\'e  bai'i^ainiiiL,''  is  a 
method  by  which  the  laborer  endeax'oi's  to  remo\-e 
or  to  minimize  the  disabilities,  notabl\-  tlie  immedi- 
ate pressure  of  his  necessities  which  foi'bid  him,  in 
isokition.  to  stand  (Uit  for  his  pi'ice.  Tlie  comi)eti- 
tioti  of  master  with  master  for  l;d)o!'  is  not  so  l^-i,:en 
th.it  it  is  not  neutralized  and  more  than  neutral- 
i/ed  1)\-  the  c  im[)elition  of  laboi'c'i'  with  labi-rer  for 
woi'k  ;  and  l)\'  coinhinati(ai  the  lahoi\'i'  tries  to  do 
away  with  the  suicidal  conipetition  of  lahorei's  \\-\ih 
each  other.      This  is  the   fir-t   hut    not  the  onI\-  aim 


1 68  The  Bargain  Theory  of  Wages. 


of  trade-unionism.  The  early  passive  polic}',  if  we 
may  so  call  it,  results  in  the  organization  of  labor; 
and  this  organized  force  is  used  to  snatch  advantage 
from  any  disorganization  in  the  ranks  of  the  em- 
ployers. So  long  as  the  employers  are  meeting  with 
slight  resistance  the  lack  of  harmony  in  their  ranks 
is  of  small  importance  but  this  lack  of  harmony  is 
the  opportunity  of  organized  labor. 

The  phrase  "  substitute  for  character"  does  not 
necessarily  imply  a  depreciation  of  trade-unionism. 
Trade-unionism  is  only  one  expression  of  the  maxim 

union  is  strength  "  ;  and  we  cannot  condemn  it  as 
arising  out  of  weakness  without  at  th.e  same  time 
passing  condemnation  on  the  whole  e\olution  of 
society.  Trade-unionism,  though  it  does  act  as  a 
substitute  [ox  character,  docs  not  destroy  character. 
On  the  contrar}-,  it  builds  character  up  and  trade- 
unionists  are  the  most  energetic  and  self-reliant,  not 
the  least  energetic  and  least  self-reliant,  of  the  work- 
ing classes.  The  ability  to  combine  is  an  e\-idencc  of 
comparati\'e  strength,  not  of  comparati\'e  weakness. 

There  are  other  external  influences,  such  as  legis- 
lation and  the  pressure  of  public  opinion,  operating 
on  bclirdf  of  labor  ^\•hich  ma\'.  without  reser\-ation, 
be  spoken  of  as  sidDstitutes  for  character.  Whatever 
their  final  effect  on  the  character  of  the  labor  they 
do  not  s[)ring  from,  or  impl}-.  the  })ossession  of  those 
(jualities  wliich  make  for  industrial  success.  On  the 
contrary,  these  influences  are  genei'allv  exerted  in 
behalf  of  tliose  who,  from  one  cau<e  or  anr)ther,  are 
weak  and    l;i(];in''  in  chaiMcte-r  and   decision.      Such 


S///>\//////rs  for  Character. 


169 


iiifluciiccs  arc  not  to  be  coiulcinnccl  merely  because 
the\-  liax'e  not  their  oiiL^iii  in  the  strenL;Lh  of  those 
on  behalf  of  whom  the)-  are  exercised.  If  the  effect 
is  to  we.ikeii  or  to  pre\-ent  the  tle\  eh  >pment  of  char- 
acter the\'  oui;]!t  to  be'  coiulenmed  and  repudiated; 
but  we  c.miiot  decide  a  priori  that  every  substitute 
for  eharactei-  has  this  elTi^ct.  It  is  true  from  of  old 
that  the  curse  of  the  poor  is  their  po\-ert\-,  and  the 
disabilities  of  labur  are  cumulati\'e  ill  their  effect. 
Conse(iuentl\-,  if  the  influence  of  lei^dsl.ition  and  the 
pressure  of  public  opinion  can  be  directe'd  to  the 
raising;  of  this  ac([uii'ed  curse,  the  re'sult  ma\'  l.)e  the 
de\-elopinent  of  character.  Le;4"islation.  nndoubt- 
edl\',  has  had  this  effect,  d'he  position  of  the  laborer 
as  a  bargainer  has  been  im})r()\'ed  not  merely  by 
l'actor_\-  Acts  and  Iunpl<_)\-ers'  Liability  Acts,  but  by 
e\'er\-  mea<ui'e  which,  positively  or  neL;"ativel\',  aims 
at  the  amelioration  of  the  condition  of  the  people. 
Compulsoi-y  education,  the  enc<  )uraL;'ement  of  thrift, 
and  measures  of  a  lik'e  kind,  streiv^then  the  laborer's 
position,  becau.se  the\-  tend  to  remove  the  dis;i.d\'an- 
ta;_;'es  under  A\'hich  he  suffers,  o\\in_L^to  his  ic^norance 
and  to  his  necessities.  Such  measures  pi'obabl}' 
pronii>te  rather  than  hinder  the  dex'elopnumt  of  his 
character  and  thus,  in  a  twufold  manner,  streiv.;;then 
his  position.  lA'cu  th()UL;h  a  measure  ma\'  -^e'cm 
calculated  to  check  the  de\-elopme'nts  of  chaiacter 
and  <elf-rr!iance,  it  is  not  neces<aril\-  to  be  con- 
demned. The  ex'ils  and  abuses  at  which  it  is  ;>imed 
ma\'  mrtre  cinnpleteh-  de:-tro\'  sejf-i-eliance  :  but  the 
propo>;;d  re-nii.-dy  ob\iou^l\'  requires  reconsideration 


I/O  T)lc  Bargain  Theory  of  Wages. 


and  amendment.  It  is  a  poor  remedy  which  aims 
only  at  removing  a  S3'mptom,  instead  of  removing 
the  cause  of  the  malady.  The  abuses  which  can  be 
removed  by  legislation  arise  out  of,  and  are  fostered 
and  protected  by  weakness  and  want  of  character; 
and  if  these  are  perpetuated  by  legislation,  in  a  short 
time  new  evils,  as  great  and  as  objectionable,  will 
have  arisen  to  produce  the  samic  effect  as  the  old 
abuses  which  have  been  suppressed. 

There  is  little  danger  that,  when  public  opinion  is 
active  on  the  laborer's  behalf,  it  will  operate  to  make 
the  disabilities  of  labor  permanent;  for  its  influence 
will  be  principally  exercised  in  forms  which  gi\'e  the 
laborer  confidence  in  his  claims,  and  make  him  more 
resolute  in  his  efforts  to  enforce  them.  Public 
opinion  can  strengthen  the  laborer's  position  because 
there  is  something  depressing  in  being  in  a  minority, 
and  the  employer  is,  to  some  extent,  subject  to  this 
common  failing.  Thus,  e\"en  when  public  opinion 
finds  no  more  forcible  expression  than  in  letters  to 
the  newspapers,  its  influence  on  the  industrial  situa- 
tion may  be  considerable;  and.  when  the  mind  of  a 
whole  community  is  strongly  impressed  with  the 
justice  of  the  laborers'  claims,  the  emplf)\-er  will  not 
be  able  to  follow  up  his  adwantages  so  prompt!}'  and, 
at  the  critical  moment,  his  hand  may  be  stayed 
througli  a  dread  of  social  disapj)robation.  Occa- 
sionalh',  public  opinion  makes  a  decided  protest 
against  the  rapacit}'  of  tlie  employer  and  expresses 
its  i)rote.->t  not  merel\-  in  word-,  but  in  money  con- 
tributed in  assir,t  a  picturescjuely  de]M-essed  class  in 


Public  Opi)iio}i  as  a  ]Vay;LS  Factor.  171 

its  slru_i;L;lc  for  cconiuiiic  frcctluni  or  liii'licr  w;il;cs. 
'ihc  s^rcat  cU)ck  strike  \\\  Loiiclon  was  a  success  be- 
cause of  i)i)piilar  synipath}-  and  popular  contribu- 
tions. The  c!eni;uul  for  the  dockers'  "  tanner  " 
ap[)r<»\ed  it>elf  ami  public  opinion  was  ar(.)used 
a;_;ainst  the  niaj^nillcence  of  the  tlock  companies' 
attitude--the  attitude  of  the  I'riend  of  Humanity 
to  the  Knife  (jrinder. 

I  L;i\c  thee  a  sixpence.      I  will  see  thee  damned 
first." 

The  intlucnce  of  })ublic  opinion  ■••  has  hitherto  been 
exerted  on  behalf  of  labor,  onl\-  in  a  capjricious  and 
a  spasnuulic  way;  and  the  merits  of  the  case  have 
usucdl\-  had  little  to  do  with  the  matter.  Public 
opinion  is  not  a  force  on  wliich  the  friends  of  labor 
Ciin  place  reliance;  for  it  mii^ht  easil}-  be  thrown  into 
the  oi)[)o>,ite  scale  \\hene\"er  the  con\"enience  of  the 
puljlic  is  threati '.led.  The  increasin;,;'  huinanitar- 
ism  or  seiiliineiitalisin  of  the  public,  and  the  in- 
creased intorniation  wiiich  all  men  h;i\'e  of  the  way 
in  which  tlie  other  iialf  li\'es  nia\'  su;^';_;est  to  the 
more  hopL'ful  that,  in  the  future,  public  opinion  will 
stren;_;lhen  the  laborer,  not  merely  in  the  dramatic 
struL;';_;le  oi  the  occasional  strike,  but  also  in  the 
.-steadier  cutest  of  which  a  strike  is  but  a  \doleiit 
e[)i>ode.      There   is   no   doubt    a   i^rowiuLi;   intere>t  in 


*  The  'li^;  iiu'ti' >:i  drawn  l:el\\'t.'''n  ]i'_;i--l:i;i. 'ii  aii-l  ])ul)lic  ("iriniMn  i- 
iv't  ,i'i'-' :!i;:c.  I  .f:j'-hiii"n  i-  hut  riA'-tarr./i,  ■]  j.iiMic  '•] -i;;!.,;,,  an'!  ilu- 
iiv'-t  licniiurii;  |iircr^  di"  labiir  lc!.M-l.iti"ii,  r.  ,..  i!ic  Kar'.nrv  An-, 
etc..  h:iM_'  lii.'cn  c:\i"ii','i  a--  a  M.'^'ilt  nf  I'lc  >y>tcin:\liL-  [irc-i'-iirc  uf  cn- 
li^litciu  '!  I'ul  ilic  1  ijiinii  ill. 


1/2  The  Bargain  Tlicory  of  Wages. 


labor  questions  on  the  part  of  those  who  make  or 
mold  public  opinion.  Newspapers  and  magazines, 
church  congresses  and  scientific  associations,  show 
tlie  same  tendency;  and  this  social  interest  will  un- 
doubtedly operate  more  fully  and  more  steadily  than 
it  has  done  towards  the  end  of  the  amelioration  of 
the  condition  of  the  working  classes.  But  as  yet 
public  opinion  is,  itself,  in  need  not  merely  of  being 
roused  but  also  of  being  educated.  It  will  be  edu- 
cated more  by  the  force  of  example  than  by  the  force 
of  the  precept.  The  influence  of  those  model  em- 
ployers from  Leclaire  to  Mr.  Mather,  who  have 
endeavored  in  part  to  see  labor  questions  from  the 
standi)oint  of  the  laborer  himself,  is  already  begin- 
ning to  have  effect  on  public  opinion;  and  the  in- 
fluence of  State  and  municipal  autliorities  is  being 
exerted  in  the  same  direction.  The  example,  which 
is  being  set  in  many  countries  by  the  government 
and  by  public  authorities  in  establishing  an  eight 
hours  day,  as  the  United  States  government  has 
done  for  its  emj^loyees,  in  inserting  in  all  contracts 
a  clause  recjuiring  a  trade-union  minimum  wage  to 
be  paid  b\-  the  contractor  to  liis  employees,  as  the 
Londtjn  Count}-  Council  docs,  o)-  in  suggesting,  as 
Mr.  Fowler  did,  in  1S93,  when  President  of  the  Local 
Government  Board,  in  a  circular  to  local  sanitary 
bodies,  that  public  works  should  be  executed  and 
public  contracts  gi\'en  out  at  the  season  when  em- 
ployment is  otherwise  scarce — is  likely  to  create  a 
sen.timcnt  which  \vill  assist  the  laborer,  and  assist 
him  in  a  manner  \\hich  can  invoh'e   few  of  the  dan- 


Public  Opinio)!  and  the  U'tr^i^cs  Quest io)i.       173 


i^rcrous  consctiiK'iiccs  which  ^ciicrall)'  follow  from 
lci;"islati\'c  interference  with  llie  coui'se  of  industry. 
The  intluence  of  this  sentiment  ma\-  inxolve  some 
injustice  to  employci's  who  are  not  backed  by  the 
[)ublic  fiMuls.  but  the  laborer's  neces-ity  will  ceast: 
to  be  reL;ar(ie(l  as  the  employer's  o])|)ortunit\\  The 
ultimate  roult  will  l)e,  thi'ouL;h  sxanpathy,  a  cle\-el- 
o|>ment  of  conscience  anion;.;-  emplo\-ers,  and  the 
cri^'ation  of  a  (.li>[)osition  to  pa\'  \\itlu.)Ut  com})ulsion 
all  that  the  laborer  is  reall\'  worth  rather  than  mei-ely 
what  lu'  can  bi,'  forcexl  to  take.  The  j^roccss  of  ele- 
N'atiiii;"  business  to  the  rank  of  a  profession,  throut^li 
tlu-  pressure  of  outside  opinion,  will  necessarily  be 
slow;  but  the  spoi'adic  appearance  (A  profit  sharin^^ 
schiMiies,  in  one  form  or  other,  shows  that  the  old 
indi\idualist  standpoint  may  be  in  time  abandoned. 


CHAPTER  V. 


THE    MOBILITY   OF    LABOR. 


N 


OTWITHSTAXDIXG  Adam  Smith's  classical 
caution  that  "  man  is  of  all  sorts  of  luggage 
the  most  difficult  to  be  transported,""  the  early 
English  economists  postulated  a  perfect  mobility  of 
labor;  and,  by  a  strange  perversion,  admitted  only 
as  a  possible  and  merely  theoretical  exception  the 
ob\'ious  fact  (^f  the  immobility  of  labor  through 
cust()m  and  ignorance.  Mobilit}-  was  the  method 
by  ^^•hich  competition  worked  to  secure  equality  of 
\\-ages.  It  is  probable  that,  fr)r  these  economists, 
cqualit}'  of  wages  meant  merel\-  an  arithmetical 
equality,  not  an  equality  of  net  ad\'antages,  or  a 
real  equality  of  payment  according  to  the  actual 
amourit  of  work  done  as  measured  by  the  result. 
Even  those  ^\'ho  reject  the  \Vages-h\ind  Theory 
continue  to  be  paith-  influenced  b_\-  the  artificial 
sim])licity  of  the  arithmetical  ideal.  Prof.  Walker 
declares -^^  that  a  difference  in  wasjes  which  would  be 


*    H',-a!tIi  of  Xiltioiis,  p.  31. 

f Walker,    U'a.;cs  Question,  p.  1=^4. 

174 


2'hc  Necessity  of  Mobility. 


1/5 


sufficient  to  iiulucc  ;i  man  to  cross  the  Atlantic  is 
often  insuft'icieiit  to  seiul  him  from  one  part  of  the 
kini^doni  to  anoth(,'r,  i^iiorin^",  inconsistently  for  the 
time  heinL;',  the  fact  that  the  northern  laborer  ma)'  be 
more  ethcieiit  than  the  southern,  in  an  e\'en  greater 
tle_L;ree  than  the  tlifference  of  waives  indicates.  He 
seems  to  rei^ard  iliffereiices  in  ua^es  as  pro\'in;j^  the 
absence  of  mobility;  whereas  mobility  and  con"i[)eti- 
tiou,  while  the\-  w  ill  secure  the  remox'al  of  accidental 
dilterences  of  waist's,  due  to  local  failures  (,)f  the 
et[uation  of  ilemand  and  sujiply,  ha\"e  no  tendeiic}' 
to  Icx'cl  up  the  waives  of  iiielficieiit  workmen  to  the 
same  height  as  those  of  efficient  workmen. '••  Idle 
facility  with  which  the  \\'ai;es-l'dind  Theory  assumed 
an  arithmetical  form  possiblx'  predisposed  the  Theo- 
rists in  fa\-or  of  the  ai'ithmetical  ideal. 

The  mobilit)'  of  labor  is  a  postulate  necessary  to 
make  the  \\'a_L;'es-l'und  ']dieor\-  march.  i\s  one  de- 
I^arts  from  it  and  the  necessit\-  for  niobility,  as  a 
theoretical  po->lulate,  decreases,  the  defects  of  mo- 
bilit\',  as  a  social  and  economic  ieleal,  become  more 
prominent.  Those  customs  aiul  j)reju(_lices  which 
the  theorists  re^^'arded  mereh'as  liindrances  to  the  free 
play  of  Competition,  come  to  be  rei;"artled  as  social 
forces  of  L^i'eat  x'alue.  Dr.  .^niart,  the  l^n^lish  e.\])o- 
nent  of  the  newest  theniw  of  distribution,  ^ocs  to 
the  oj'positc  extreiiK',  ])crhai)^.  when  he  declares: 
"  I'hysicall)-,  Libor  i^  not  mobile;  histoiacall}'  it  has 
ne\-er  been   mobile;   and,  ethicalU'.  it  should  not  be 


fliun 


iIk'  t.ililf-  L;i\fii  in  c!);i]  iter  \i. .  p.  2  1  J.  for  I  \  i^iuiuc  a^  to  in- 
'i  111.  '!>;lit\  to  lr\rl  up  w  M  ■i-s  .ii'.'l  i-Mn..\  c  acci'leiital  dil'lY-rrllLC-'. 


1/6  The  Bargain  Theory  of  Wages. 


mobile."  *  This  terse  statement  is  possibly  too  epi- 
(^rammatic  to  be  altogether  accurate;  but  there  is  a 
larger  measure  of  truth  in  it  than  in  the  Wages-Fund 
Theory  postulate  of  uni\'ersal  mobility.  Histori- 
cally, even  the  Theorist  would  probably  admit,  labor 
has  never  been  mobile ;  and  he  might  go  so  far  as  to 
allow  that  there  are  great  hindrances,  even  at  present, 
to  the  mobility  of  labor;  but  that,  ethically,  labor 
should  not  be  mobile  is  contrary  to  his  most  cherished 
opinions.  The  change  of  views  regarding  mobility  is 
part  of  the  general  change  of  opinion  regarding  the 
whole  wages  question.  It  is  incorrect  to  say  that  at 
present  labor  is  not  in  an}-  degree  mobile;  because 
the  great  characteristic  of  an  age  of  transport  is  the  in- 
creasing mobility  of  labor;  but,  at  the  same  time,  as 
the  physical   difficulties  of   transporting  the  human 

luggage  "  diminish,  the  ethical  objections  to  mo- 
bility increase.  While  the  difficulties  of  transport 
were  great,  only  the  more  self-reliant  and  self-de- 
pendent had  the  enterprise  to  change  their  habita- 
tion. There  was  then  no  social  danger,  but  great 
social  and  individual  benefit,  in  the  migration  of 
labor.  When,  however,  these  difficulties  of  trans- 
port no  longer  deter  the  weakest  in  character  and 
self-reliance  from  emigrating  from  one  cjid  of  the 
earth  to  the  other,  it  is  well  that  the  ethical  objec- 
tions to  mobility  should  be  emphasized. 

As  industrial  competition  is  probably  only  a  short- 
li\'ed,  and  not  over-beautiful,  stage  of  transition  from 
custom   to  combination,  so  mobility  is  only  a  tem- 

*  Stud  it's  i>i  Iiicviontii's,  p.  171. 


A  Substitute  for  Mobility. 


// 


poraiy  postulate  of  the  theoi')'  of  distribution. 
When  the  lj(^ncls  of  custom  have  been  broken,  and 
tlie  interests  of  tlie  worl^er  are  no  h)n^rcr  safei;uarded 
b)-  tr.idition  and  pubHc  opinion,  it  is  necessar)'  that 
the  hU)orer  should  be  read}-  to  follow  \vhere\'er  his 
economic  intei'ests  calls.  It  is  })ractically  the  (jnl)- 
\\a\-  1)}-  which  an\"  measure  of  justice  in  distribution 
can  be  obtained.  As  soon,  howexer,  as  a  sulxstitute 
for  mii;'ration  is  available,  all  the  ethiccd  objections, 
hardly  silenced  hitherto  by  the  plea  of  necessity, 
become  x^ociferous.  The  combinati(jn  of  labor  prtj- 
\-ides  a  substitute  for  niobility,  not  a  complete 
substitute  renK^x'in;^  altoi^ether  the  necessity  of  mi- 
L;"rati(^n,  but  doinu;  awa}' with  the  more  ol)jcctionablc 
features.  Mobilit\-  is  no  lonj^er  the  oidy  and  indis- 
pensable condition  of  justice  to  the  \\ay;e  earner. 
The  trade-unions  in  the  early  stages  of  their  history 
enc(nirag"cd  mi_i;"ration  ;  but  as  they  ]ia\'e  g'rown  in 
stren!_;th  and  become  able  to  enforce  tlu:ir  demands 
x\ithout  recourse  to  a  strike  they  lia\'e  modified  their 
pojic}-.  There  is  no  loni;er  the  same  need  to  facili- 
tate mii^ration  because  "  the  more  perfectl}'  a  trade 
is  organized  the  less  necessity  is  there  for  its  mem- 
bers to  tra\  el  in  search  of  worlx."  ■■  Within  the  last 
twenty  \'ears,  trade-union  po]ic\"  witli  n/gard  to 
ti'axelling  benefits  has  completel\-  changed.  This  is 
due  in  part  to  the  fact  that  impro\-ed  communication 
has  le\'elled  wages  up  so  as  to  bring  about  some 
measure  of   e(iu.dit_\-  of   net  ad\antage-s ;   and  al>o  in 

*  t'l.iin    L'\i'!ciicc    uf    I'aiicrr,     Maker--     A--^ 't  ia;i  .n    'iK-f'Tt-    l\oyal 
I.alxii-  (.'..iiiini-^:"!i  (1".iil;.I.  'juntcil  hy  I  >raL;(.-.   l'':-:  iiiiv.l-loycd ,  p.  i8. 


178  TJlc  Bargain  Theory  of  Wages. 


part  to  the  fact  that  the  same  cause  has  universaHzed 
trade  depression  when  it  occurs,  and  rendered  even 
emigration  a  futile  endeavor  to  escape  from  bad 
trade.  The  network  of  trade-unions  covers,  the 
land;  and,  as  local  unions  have  been  federated  into 
national  and  international  unions,  while  govern- 
ments and  municipalities  have  organized  labor 
bureaus  and  industrial  agencies,  information  re- 
garding w^ork  and  wages  has  become  more  definite. 
Instead  of  receiving  a  travelling  benefit,  the  trade- 
union  out-of-work  member  has  his  fare  paid  to  a 
district  ^\•hcre  work  may  almost  certainly  be  ob- 
tained. The  practice  has  become  obsolete  because 
organization  is  better  and  the  unions  have  definite 
reports  of  the  state  of  the  labor  market;  and  be- 
cause as  the  necessity  of  the  policy  becomes  less 
urgent  the  social  and  ethical  objections  to  it  become 
more  con\'incing.  Some  unions  discarded  the  policy 
because  it  fostered  a  ro\"ing  spirit  and  degraded  the 
members:  others  ha\-e  abandoned  it  because,  as  in 
the  case  of  the  iron  founders,  it  was  made  use  of  to 
secure  a  free  holiday.  Even  from  the  narrowest 
trade-union  point  of  view,  the  policy  was  one  marked 
out  for  abolitir)n,  so  soon  as  it  became  possible  to 
do  av\'ay  with  it.  The  object  of  trade-union  policy, 
collective  bargaining,  cannot  be  achieved  unless  a 
union  can  control  its  own  members;  and  the  rov- 
ing unsettled  s])irit  \\'hich  took  possession  of  the 
professional  mendicant  as  ]\Ir.  Howell  calls  him, 
rendered  liim  less,  not  more  amenable  to  union  dis- 
cijiline.      I'"rom  the  broader  point  <jf  \-ic\v,  moreover, 


Et  flic  a  I  ObjiCtions  to  Mobility.  179 


to  which  to  sonic  extent,'^  the  ohlcr  and  stroni^cr 
iniions  have  risen,  viz.,  that  the  moral  and  inte'l- 
Icctual  progress  of  the  workers  is  essential  c\-en  for 
material  success,  the  policy  of  assisted  mi^^ration  is 
open  to  weighty  objections.  It  is  not  that  the  home 
and  place  attachments  are  hindrances  to  mobility 
but  that,  from  the  point  of  \ie\v  of  ^i;'ood  citizenship, 
these  hindrances  shovdd  not  be  remoxx'd  but  built 
up.  Ubi  biJic  ibi patria,  as  a  maxim  of  politics  or 
of  industr\',  ,^i\'es  us  neither  i^ooil  citizens  nor  L;'ood 
workmen.  Mobility  may  often  be  the  only  safe- 
guard of  the  interests  of  the  worker;  but  ^\•hcn,  by 
efficient  ori^'anization,  it  can  be  superseded  and  the 
same,  or  neai'ly  the  same,  benefits  achiev'cd  without 
scndinj^'  men  forth,  homeless  wanderers  from  one 
job  to  anotlier.  society  is  the  trainer.  There  are  still 
man\'  trades  and  industries  wdiere  the  free  circulation 

*  "  At  I'lie  time  tianipiiu;  \va-  s^•stematic  aii'l  Ljeiiei'al  ;  and  it  be- 
came a  [ML-. It  m.i-^ancr,  f '  a'  man}'  men  niei'el}'  ii>eil  the  s'U'iety  as  rx 
mean--  {"X  eiiai'lini;  theni  to  ti'anip  all  o\k:x  the  ounti'}',  li\"iiii;  upon 
the  fiuiiK  (^f  tile  uniun.  .  .  .  This  practice  has  ^jreatl}' dimini-heil 
t)f  late  year-.  ;  .  .  .  it  m)  ilei^enerated  as  to  become  little  better 
than  a  kind  (>f  jir.'fe^^ional  mendicity." — Ho\\-el!,  C^'ii  jlids  of  Capital 
and  Labar,  pp.  141-142. 

Since  i'^77,  "the  system  of  travelling:;  l)enetit  lias  declined  more 
and  more.  It  is  discouraL;ed  by  nearly  ail  the  belter  orL;anized 
unions  throULdiout  the  countrvand.  as  a  rrdc,  rightly  so,  In  the 
L'T.'h.n  ^-ciety  ..f  ( '-niposit(,rs  and  the  Scottish  Typo'^ra;  ihica!  As- 
socia'i'  n  travelling  relief  has  been  ab^ilidied  for  st.\-(.ral  \'ears,  the 
members  receisdr/^'' a  rrmowal  L;ran!  to  enable  tlum  to  proceed  t"  an 
ent^aLjenient  thev  new  have  obtained  in  an}-  pail  of  tin.-  Iddted,  Kiiii;- 
d'lm." — /'/..''.,  p.  142,  n.  Cp.  ab-o,  I)rai;e's  I'hi  i'licnipL'ycJ,  p. 
I?,  n. 


l8o  TJic  Bargain  Theory  of  Wages. 


of  labor  is  essential  because  no  other  method  can  be, 
or,  at  any  rate,  has  been,  devised  to  secure  the  same 
result.  Where  a  trade  is  not  organized,  where  the  sup- 
ply of  workers,  in  the  unskilled  trades  especially,  is 
liable  at  times  to  be  far  in.  excess  of  the  demand,  it  is 
of  \"ital  importance  that  e\'cry  worker  should  be  ready 
to  move  to  a  place  where  the  demand  is  greater.  i\s  a 
social  factor,  combination  is  preferable  to  mobility 
and,  as  an  economic  force,  not  less  powerful.  The 
same  results  may  be  achie\xd  by  either  method. 
Organized  trades  have  discarded  their  policy  of  en- 
couraging migration:  unorganized  trades  depend 
largely  on  mobility  for  any  improvement  in  the  con- 
dition of  labor  which  they  desire;  and  their  trust  is 
often  justified  b\-  the  results.  The  wages  of  domes- 
tic servants  have  risen,  both  really  and  nominally,  as 
far,  and  as  quickl\-,  as  the  wages  of  atiy  other  class; 
and,  in  their  case,  the  rise  is  due  entirel\-  to  their 
mobility.  Domestic  serwants  are  not  in  any  way 
organized,  unless  it  be  by  a  kind  of  tacit  combina- 
tion; but,  as  a  class,  they  possess  the  ver\-  highest 
degree  of  mobilit}',  as  an}"  housekeeper  will  most  \'e- 
hemcntly  testify.  The\-are"  fourid  "  in  e\'erything  : 
the\-  have  no  locrd  and  few  personal  attachments, 
except  of  a  transitor}-  nature,  to  bind  tliem  to  any 
particular  place:  tlie  demand  for  serwants  exceeds 
the  su})ply;  and,  without  a  "  character,"  the\-  can 
obtain  a  situation.  The  result  is,  that  in  the  rise  rif 
their  wage,  lhc\-  exliibit  the  maximum  advantages 
of  mol)i]ity  ;  but,  as  a  class,  arc  coming  to  exhibit 
the  mentrd  and  moral  deterioration  in  which  exces- 


Trade  Miibilitv  ti)t(l  Place  Mobility. 


I. Si 


si\'c  mobility  result.-..  In  the  donu'stic  scrwiiit  the 
early  I'.ii;4li>h  economist  niii^ht  find  hi.s  ideal  of  the 
free  circulation  of  lahoi',  but  it  has  no  beauty  that 
we  shouUl  cle.-.ire  it. 

The  ])hrase,  niol)ilit\'  of  lab(jr,  co\-ers  two  \-ery 
clitTerent  k'iiuls  of  nH\L;ratioii  whicl;,  ordinaril}',  ha\-e 
little  to  do  w  ith  each  other.  It  includes  the  nii;_M-a- 
tion  frt)ni  one  indu>try  or  occui)ati!)n  to  another, 
which  we  nni}.-  call,  trailc  ])iobility ;  and  mii;i';ition 
from  one  di-trict  or  country  to  another,  place  iiiobil- 
itv.  The  foi'niei'  is  undoubtedl\-  the  more  difficult 
and,  unlik'e  the  latter,  is  becominsj;  incrcasin!j;l\'  more 
diftlcult.  The  improx'ed  means  of  transport  and 
Communication  which  rendered  place  mobilit\'  much 
easier  hax'e,  on  the  whole,  as  part  of  the  i^reat 
modi.-rn  mo\-ement  towards  specializatimi,  helped 
to  make  trade  mobility  harder,  if  not  a  practical 
impossibility.  It  is  true  that  there  is  the  possibilit)- 
of  exaL;i;\-ratin!4"  the  restrictions  of  s[ieciali/.ation.. 
I'l'of.  Mar-hall  has  shown  ■•■  how  t^eneral  intelliL^ence, 
ill  nearl)'  all  industrial  occupations,  is  risiuL;'  in  im- 
])orta!ice  as  compared  with  specialized  skill ;  and,  to 
the  extent  in  which  this  holds,  increasing;"  specializa- 
tion does  n(,)t  necessarih'  imph'  !_;reater  permanence 
of  tratle  bound. u"ies.  Specialization  in  the  form  of 
locdi/ati')!!  of  industr\"  natural!}'  desti'o\"s  mii; ration 
fi'om  di>ti'ict  to  district;  while,  as  we  >hall  see  later  in 
this  ciKipter.  place  mobilit\-  has  a  certain  teiidenc}'  t(~) 
promote  track'  mol)ility  where  ;.;'enei'al  intelliL;\  nee  is 
more  in  demara!  tlian  hi..;hl\-  specialized,  skill.      When 


1 82  The  Bargain  Theory  of  WagtS. 


specialization  lias  proceeded  so  far  that  the  market 
for  speciaH/.cd  lab(jr  is  a  local  market,  migration 
from  district  to  district  is  of  comparati\-ely  little  im- 
portance, unless  the  wcjrker  is  prepared  to  take  the 
step  of  chanyini^  his  trade  at  the  same  time. 

The  early  economists  spoke  liL,ditly  of  trade  mo- 
bilit}',  as  if  there  \\'ere  no  real  hindrances,  as  if,  in  a 
\vord,  workmen  took  up,  or,  at  any  rate,  could  take 
up,  a  new  trade  e\"ery  week.  The  assumption  is 
necessary  for  the  theor\-,  and  they  make  it  unhesi- 
tatin<^l}-.  J-Lven  Adam  Smith,  who  has  warned  us 
that  man  is  "  of  all  sorts  of  luc^rfra^rc  the  most  diffi- 
cult to  be  transported,"  ""'  for^c^ets  the  significance  of 
his  fjwn  warning,  and  assumes  that  "  the  whole  of 
the  ad\-antages  and  disadvantages  of  the  different 
emplo}'ments  of  labor  .  .  .  must,  in  the  same 
neighborhood,  be  either  perfectly  equal  or  continu- 
ally tending  to  ecpialit}'  "  ;  altlK)ugh,  to  secure  such 
an  equality  it  would  be  almost  necessary  for  every 
^\•orkman  to  be  ready  and  able  to  change  his  trade 
at  a  moment's  notice.  Few  economists,  except 
McCidloch,  to  whom  it  seems  to  have  been  gi\"en 
to  carry  c\'crything  to  an  extreme,  ha\X'  gone  so  far. 
Most  have  recognized,  more  or  less  explicitly,  the 
existence  of  what  Cairncs  called  non-competing 
groups  \\-ilhin  wliich  there  may  be  perfect  mobility 
but  between  which  there  is  [)ractical!y  no  migration. 
Ivjtween  the  extremes  of  .Adam  Smith  and  l^rof. 
Cairnes  the  truth  lies.  Unless  the  non-competing 
group   is  so   narrow  as    to    include   r)nh'  one   trade, 

*   Wealth  of  Xalions,  IJuok  I.,  p.  41. 


I'radr  Mobility 


183 


there  is  110  such  perfect  nmljiht}- as  Cainies  (lemaiuls  ; 
while, between  tlie  ;j;i"ou[)s  there  may  loe  httle  streiK^tli 
in  the  tendency  to  pass  fr(  ini  one  to  another  ui)\\'ar(ls, 
there  is  .ilwax's  a  consicKrahle  nio\enient  th)\\n\\'ar(ls. 
So  far  as  aihik  l.ibor  is  concernetl,  tratle  niohihly 
unfortun;itel\-  ;.;enerall\'  spells  (le_i;"ra(lation  from  the 
ranks  of  the  skilled  to  the  un-killed/'-  TlK're  is 
alwax's,  owiiiL;  to  old  a^i.-  and  infii-init}-  and  to  lack 
(»f  a.daptalion,  a  moxcment  downwards;  and,  as  the 
amount  of  woi'k  x\hich  can  In;  done  without  any 
pri_-\ious  tr.iiniiiL!,',  is  l)(,:comin;4  less,  tlu'  deL,n-adation 
is  apt  to  l.)e  \'er\'  >udden,  from  sldlli'd  laljor  pa^t  un- 
skilled lal)or  to  casual  labor.  We  ch)  occasionally 
meet  men  who,  in  their  time,  have  pla\-ed  many 
parts,  and  \"et  have  maintained  their  L;rade  or  e\'en 
ri>en  in  the  sc<de ;  but,  as  a  rule,  the  measure  of 
their  tot.d  success  is  not  such  as  to  lead  us  to  place 
much  sti'css  on  trade  mobilit\-  as  an  aL^ent  in  indus- 
trial fortune.  h^^'ii  in  Amei'ica,  the  ]):ir,uli-^e  of  sclf- 
ma]-:ini;'  men,  the  [)ropoi'tii  ui  of  those  who  ri>e,  is 
\-er\-  small.  .\  c;'reat  many  instances  of  strilxiuL;"  suc- 
cess ma\'  be  enumerated,  but  it  seems  probable  that 
the  day  of  the  self-made  man  who  rises  from  the 
ranks  is  past. 

It  is  more  than  doubtful  whether  trade  mobility 
increases  the  real  wa;_^es  of  the  mi;::;i'ant.  ]-')\'  chaiiL;'- 
in;^^  irom  one  occupatioii  to  anotliL'r  he  nia\-  secure 
an  immediate  ad\-anta;^:,e  ;  but.  to  secui'c  thi<  ad\'an- 
ta;_;"e  ot  oppoiiunit}-  1  for  that  is  ,dl  it  u-u.ill\"  amounts 
to),  he  saciahces  the   whole  rent  of  abilit\-  which  he 

■'■  r.ut  ^cf  l:\tff  ill  lli;^  rliaiitcr,  p.    IQd, 


184  The  Bargain  Theory  of  Wages. 


might  have  gained  from  his  previous  training.  The 
changes  are  often,  in  the  long  run,  short-sighted.  It 
might  ahnost  be  laid  down  as  a  general  rule,  to  which 
of  course  there  are  particular  exceptions,  that  when 
an  individual  changes  his  trade  or  his  country,  after 
he  has  served  his  apprenticeship  or  completed  his 
training,  we  have  a  tolerably  certain  indication,  if 
not  of  failure,  yet  of  very  moderate  success  in  the 
new  calling.  To  seek  an  immediate  advantage  by 
the  sacrifice  of  past  training  leads  to  the  goal  reached 
by  those  whose  parents,  or  themselves,  have  been 
unable  to  resist  the  temptation  offered  by  the  high 
immediate  returns  from  odd  jc^bs.  Just  as  the  earn- 
ings of  those  who  follow  two  different  emplo\'ments 
do  not  exceed  the  earnings  of  those  who  confined 
themselves  to  one,  so  men  wlio  pass  readily  from 
one  employment  to  another  at  the  suggestion  of  the 
shghtest  inmiediate  advantage  seldom  succeed  ulti- 
mately in  bettering  their  position;  for  we  must  take 
account  not  merely  of  the  earnings  of  a  week  or  a 
year  but  of  a  working  lifetime,  and  consider  the  rent 
of  ability  which  may  arise  after  years  of  patient  in- 
dustry, in  one  occupation." 

*  An  exception  must  be  made  in  case  of  \\hat  may  he  called  step- 
pin_L';-.--li>ne  em]ili'ynients.  Very  few  of  the  men  who  enter  the  teach- 
\\v^  profc>>ion  in  America  as  puhlic-schon]  teachers  liave  any  intention 
of  remaining;  in  the  profession.  It  forms  a  very  convenient  means 
for  students  who.-e  funds  are  exhausted  hy  the  expenses  of  college  to 
earn  enough  to  enable  then:  to  attend  a  professional  school.  It  is 
good  for  the  }'oung  men  tliat  they  should  have  an  opportunity  of 
earidng  immediate  high  returtis  Init  is,  on  the  whole,  very  bad  for  the 
status  of  the  profession. 


The  Disposable  Fund  of  Labor. 


185 


Since  tlio  exposure  of  the  \\';ii;e.s-r\in(.l  Theory, 
few  writers  Ciiu  be  fouiKl  to  assume  the  trade  nio- 
biUty  of  adult  hdjor.  Prof.  Cairnes  declares  that, 
within  the  non-conipctin;,;'  L;"roups  mobihty,  and, 
through  nioljiUly,  e([uaht\-  of  atl vantages,  is  secured 
l)y  the  existence  of  a  disposable  fund  of  younc^  per- 
sons annually  arriviuL;'  at  industrial  ai;e.  In  one 
sense  the  cnei'L^ies  of  these  youn;^  persons  are  at  dis- 
posal to  be  tlisti'ibuted  anioiiL;"  the  industries  \\'hich 
offer  the  largest  net  ad\-antaL;"es  ;  but,  even  ;granting 
the  fullest  measure  of  freedom  of  industrial  choice, 
it  is  (piestionable  wdu'ther  the  fund  is  large  enough 
to  protluce  the  desired  effect.  The  number  of  }-oung 
persons,  annually  arrix'ing  at  industrial  age,  does  not 
constitute  more  than  two  and  a  half,  or  three  per 
cent,  of  tin;  total  number  of  \v(orkers ;  and,  in  the 
best  of  \-ears,  the  trade-union  returns  show  that  as 
large  a  pro[)orlion  oi  the  best  workers  of  the  country 
are  out  of  work'.  C()nse(iuentl\',  there  is  no  industry, 
or  small  group  of  industries,  read}'  and  able  to 
absoi'b  all  tliese  new  recruits  to  the  labor  army; 
anil,  in  tlie  absence  of  a  s[)ecial  opening,  the  proba- 
bility is  that  the  annual  two  or  three  per  cent,  will 
be  distributed  over  the  whole  industry  of  the 
counti'y. 

It  is  obvimis  that,  apart  from  pretlilections  for 
particulai-  occupations,  on  the  part  of  the  children 
(which  ai'c  naturally  not  based  on  an\'  estimate  of 
the  net  ad\'antages  of  the  employment  1,  the  disposi- 
tii')n  of  this  fund  of  labor  ilepends  on  the  knowledge 
and    foi-e>ight   of   the   parents  and  on  the  sacritices 


1 86  TJlc  Bargain  Theory  of  Wages. 


they  are  prepared  to  make.  The  knowledge  is  not 
al\va\'.s  sufficient;  though  most  parents  wiU  make 
sacrifices  for  their  children,  sufficient,  at  least,  to 
place  the  children  in  as  good  a  position  at  the  be- 
ginning as  that  at  which  they  themselves  stand. 
Farther  than  this,  except  in  special  cases,  the  aver- 
age parent  is  not  prepared  to  go.  Here  and  there, 
we  may  find  men  who  are  endeavoring  to  place 
their  cliildren  in  a  better  position  than  tliey  them- 
selves occupy.  Men  whose  ambitions  have  been 
thwarted  often  become  ambititnis  for  their  children; 
but  we  must  beware  lest  our  admiration  of  the  sacri- 
fice lead  us  to  overestimate  the  frecpiency  of  its 
occurrence.  It  is  regrettaljle  that,  owing  to  the 
wr(.)ng  dex'clopment  of  our  educational  systems, 
these  sacrifices  are  generally  made  with  a  view  to 
secure  for  the  children  the  chances  of  a  professional 
or  semi-professional  career.  The  crowded  state  of 
the  market  for  genleel  unskilled  labor  shows  that 
knowledge  and  foresight  on  the  part  of  the  parents 
are  (piite  as  essential  as  readiness  to  make  sacrifices. 
It  is  rather  on  account  of  social  position  than  on 
accf)unt  of  higher  wages  in  the  employment,  that 
sacrifices  are  made  by  the  parent;  and  where  the  in- 
spiration of  the  hope  of  seeing  a  son  "  wag  his  hcid 
in  a  ])(_)0[)it  "  is  wanting,  the  sacrifices  made  are  not 
\'ur)-  great.  .'\  great  deal  of  tlie  labor  legislation  of 
the  last  half  century  was  passed  to  pre\'e:nt  the  sacri- 
fice of  the  children  for  the  tcm})orar\'  advantage  of 
the  parents;  and  in  that  legislation  we  have  an  ob- 
•ectix'e    ;uid    unsentimental   estiniate   of   how   much 


luithiTS  and  So)is 


187 


sonic  parents  arc  picparcd  to  iId  for  tlicir  offspi'in;^^". 
In  Iai'i;c  cities  ])i-()ljably  less  is  di)ne  for  children  b\' 
their  parents  than  is  done  in  tlic  smaller  towns  and 


in    the    coiinti\'.      Ii 


ile   of    the    .i;"i'eat    \'ai"iety    (jf 


occnpations  in  a  Iari;e  city,  it  is  often  difficult  to  i;ct 
a  l)oy  a[ip!'enticed.  I'~,in[)lo\'ers  are  able  to  rel}'  on 
the  innniLH'ation  of  skilled  artisans  trained  in  the 
countrv  and  arc,  therefore,  unwillin;^  to  take  the 
ti'ouble  of  trainini;"  ai)i)rentices.  The  difficult}'  of 
<_;ettiiu;"  l)o\-s  appreiiticcil  niake'S  })arents  \'ield  the 
more  readil\-  t(5  what  Mi'.  C'harles  Uooth  calls  the 
temptation  of  odd  jobs.  In  a  larL;"e  cit\',  pay  is 
more  strictl}'  accordiiiL;"  to  the  \\'ork  done;  and  if  a 
boy  can  (V^i  the  same  work'  as  a  man  his  remuneration 
will  be  alm.ost  as  lar<;'e  as  a  man's. 

Idle  consecjuencc  of  the  absence  of  customary 
wa^es  is  that  the  cit\'d)red  boy  has  abundant  oppor- 
tunities of  earning;"  lari^e  immediate  returns  for  laljor, 
w  hich  re([uires  little  more  skill  than  he  has  as  his  cit\' 
bii'thi'iidit.  It  is  not  altogether  a  matter  of  woiidei' 
that  the  parents,  admost  i,lishearteiied  b\'  the  cease- 
less strui;'L;Ie  to  keep  a  elecent  roof  o\'er  their  heads, 
should  succumb  to  the  tem[)Lation  of  addini;"  such 
an  amount  to  the  faanil}'  carninL^s  as  will  make  the 
dilfereiice  between  ceaseless  w'orr\'  and  comparati\'e 
C'MUeiit;  e\'en  althou;_;"h,  \\'hat  pi'obabh'  t!K'\'  do  not 
realize,  the  boy  nia\',  in  a  [c\\  \'ears.  be  left  -tramUxl. 

Abi^t  fathers  will  tleclare.  as  a  matter  of  cour>e, 
that  the\'  ])refer  to  l.)rini(  up  their  <ons  to  any  tr;ide 
but  their  own;  but,  et[uall\'  ;;s  a  m.iUri'  of  coui'-^e, 
nine  tenths  of   the  disposal)le   fund    of   labor   will  l)e 


TJie  Bargain  Theo?y  of  Wages. 


annually  distributed  according  to  the  trade  of  the 
fathers.  Sometimes,  as  in  country  villages,  the  dis- 
position will  be  accidental.  A  boy  is  apprenticed 
to  a  plumber  or  a  carpenter  according  as  it  happens 
to  be  the  plumber  or  the  carpenter  who  requires  an 
apprentice.  In  larger  places,  the  fact  that  vacancies 
for  apprentices  are  few,  especially  when  the  district 
has  specialized,  more  or  less,  in  one  kind  of  pro- 
duction, or  when  the  trade-union  prejudice  against 
apprentices  is  strong,  and  the  fact  that  a  father  has 
exceptional  opportunities  of  advancing  his  sons, 
afford  a  motive  strong  enough,  were  the  influence 
of  custom  and  habit  not  operative,  to  secure  that 
the  son  follows  his  father's  trade.  In  the  best 
shops,  indeed,  those  into  which  a  father  would  en- 
deavor to  introduce  his  son,  preference  is  generally 
given  to  the  sons  of  employees  when  a  vacancy 
occurs.* 

The  trade  mobility  of  labor,  whether  of  adults  or 
of  young  persons,  has  never  been  very  great.  Adults 
cannot  change  without  the  sacrifice  of  the  benefits 
of  past  training;  '\\'hile  children  are  brought  up  to 
the  trade  of  their  parents  because  circumstances  are 
stronger  than  the  \'ague  wishes  of  the  jxirents.  Prof. 
Walker  asserts  that  till  the   mobility  of  the  adult  is 

*  The  firr^t  article  in  the  regulaiioiis  of  Redouly  et  Cie.  (Ancien 
Mai-son  Leclaiie),  I'ari>,  i^  to  the  effect  tliat  "  tl:e  S(jns  and  nephews 
of  the  foremen  (d  the  \vork>hii;js,  of  the  workmen  and  employees, 
menihers  (jf  the  noyau,  are  received  as  anpreriticcs  in  ])reference  to  all 
others." — Canadian  Blue  Hook.  "Social  I'',conomv  "  (iSS<j),  p.  173. 
Elsewliere,  thiiiiL;h  the  preference  is  not  so  clearly  announced,  the 
practice  i.^  much  the  same. 


Effect  of  Place  Mobil ily  on  Trade  Mobility.     1S9 


secured  there  will  be  no  force  in  the  tendency  for 
chiklren  to  l)c  apprentieetl  to  trades  other  than  those 
followed  1j\"  tlu-ii'  f.ithers.  In  \ie\v  of  the  distinction 
between  trade  niobilit\'  and  [)lace  mobilil}',  we  may 
modify  this  assei'tion  to  the  form  that  till  place  mo- 
iMlity  has  been  secured  for  the  adult  worker,  there 
is  \-er)-  little  opportunity  of  trade  mobility  for  his 
children..  When  tlie  adult  worker  has  chanc;'ed  his 
home,  esjieciall)-  when  he  has  emigrated  to  a  new 
countr\-  with  greater  opportunities  and  a  more  open 
career  for  talent,  the  chances  of  the  children  adopt- 
ing a  different  occupation  from  their  fathers  are 
greath'  increased.  Emigration  docs  not  always 
secure  to  the  emigrant  the  benefits  he  anticipated; 
but  it  rai'el}-  fails  to  impro\-e  the  chances  of  his 
children. 

Migration,  or  place  mobilit}",  has  a  certain  ten- 
denc\-  to  promote  the  trade  mobility  even  of  adult 
labor — a  tendenc}'  most  marked  in  the  case  of  emi- 
gration. Whether  the  migration  from  district  to 
district  of  tlu:  same  country  or  from  the  rural  coun- 
tii's  to  the  cities  has  the  same  tendenc}',  is  not  ([uite 
clear.  The  high  returns  for  plu'sical  strength  and 
for  tru^twortliiness,  with  both  of  which  qualities 
country-bred  workers  are  comparatively  better  en- 
tb)wcd  than  tc^wnsmen  arc,  offer  a  temjitation  to 
rural  (.'migrants  to  a  large  cit\'  to  for>al<e  a  skilled 
trade  fof  an  unslvilird  occupation.  'riiei'e  ai'e  main* 
occujtation^  in  wliich  tlKse  ([ualitics  rathei'  than 
technical  sl^iil  or  alertness  are  requii'L'd;  and  conse- 
(]U'_'ntly  wc  fnul  immigrants  in  large  numbers  in  these 


igo  TJw  Bargain  Theory  of  Wages. 


occupations. '•■  \Vc  should  also  expect  that  the  gen- 
erally trained  labor  of  the  provinces  might,  in  many 
cases,  prove  unable  to  maintain  its  position  in  the 
highly  specialized  industries  of  the  metropolis:  with 
the  result  that  a  certain  proportion  of  the  emigrants 
would  seek  employment  in  the  relatively  highly 
paid  unskilled  occupation.  Full  statistics  are  lack- 
ing on  this  point,  and  those  we  have  hardly  justify 
any  conclu.-^ion.  The  figures  given  in  Booth's  Life 
a>id  Labor  of  tlic  People,  by  Mr.  H.  Llewellyn  Smith, 
show  that  out  of  a  thousand  emigrants  a  slightly 
smaller  number  of  skilled  artisans  is  found  working 
in  skilled  trades  after  migrating  to  the  town.  Out 
of  one  hundred  and  fifty-nine  skilled  artisans 
scheduled,  four  only  ha\'e  dropped  into  the  ranks  of 
the  i;nsl-:illed,  while  six  of  the  total  five  hundred 
included  in  the  table,  one  of  whom,  however,  was  a 
boy  of  fifteen  when  he  migrated  from  London,  had 
risen  from  the  ranks  of  unskilled;  or  2.5  per  cent, 
of  the  skilled  artisans  ha\-e  fallen,  while  1.7  per  cent, 
of  the  unsl<illed  have  risen  to  the  ranks  of  skilled 
labor,  t 

*  111  Decemljer,  7  333,  70  per  cent,  of  tlie  city  and  the  Metropolitan 
I'olice  ([.f'li'l'in)  \\-ere  l)orn  el>e'A'here  tlian  in  Loudon.  —  r.ooth's  Life 
and  Lal)or  nf  the  Pcoplt\  vol.  iii.,  ]>.  S7.  In  one  of  the  hid)-di>tricts 
'■f  the  city  of  Lnndon  the  proportion  of  (.utsidc-r>  i.--  as  hii;h  as  46  per 
ce!!t.  of  the  total  jjopidation  of  the  di-tr:ct  ;  ami  tlie  fact  i>  accounted 
for  by  the  nature  of  the  i-ccupati>in  of  the  t'erinanent  portion  of  the 
]i'ip)ulatioii  (if  the  cit}',  viz.,  caretakin;^'. — //-///.,  p.  124. 

+  iJiK.th's  Life  nnd  I.al'O'-,  \i>\.  iii..  p.  140.  ]-"i\e  hundred  cases 
u'ere  actually  -cheduled.  but  to  obtain  a  basis  for  comparison  one 
(hou.-and  i.>  taken  (p.   140)  as  the  standard  total. 


ll))ngraiioJi  ami  Trade  Mobility. 


191 


EiniL,n'ation  seems  to  promote  Ir.ule  mobility  more 
readil\-  th.m  miL;i-,ition  fiom  the  rural  counties  to  the 
cities  dues.  Tliis  is  [)o>siljl\-  due  in  part  to  the  fact 
that  emi_L;"r<itioii  is  a  much  i;reater  chair^e  and  creates 
a  dispo>ition  to  make  further  changes  when  occasions 
offer  ■■■'";  but  more  hiri;el\-,  probably,  to  the  fact  that 
in  the  new  countries,  towards  which  international 
migration  is  maiidy  directed,  the  di\ision  <jf  em- 
ployment is  not  so  marked  as  in  older  industrial 
communilies.  Conse(|uentl\'  i^eneral  intelligence  is 
rehiti\el\-  more  important  in  a  new  countr\-  than 
liiL;hly  specialized  ability;  while  the  t^reater  use  of 
automatic  machiner\-,  owin^^  to  the  dearness  of  labor, 
has  reduced  man\'  occupations  to  the  class  of  the  un- 
skilled, thouL;h  nominall}-.  the\"  are  still  skilled  indus- 
tries. The  relati\'e  disadwintai^'^e  at  ^\'hich  hi<^hly 
s[)ecialized  abilit}'  is  placed  in  the  colonies  is  so 
notoi'ious  tliat  the  Ih'itish  Mmii;rants'  Information 
Office  delil)erately  warns  skilled  artisans  that  the 
Colonies   are   no   place   for  them. 

In  new  countries,  there  is  not  tlie  same  strong  line 
drawn  between  dilferent  emplov  inents  and  (.littereiU 
brandies  of  the  same  trade,  as  in  our  own.  .  .  .  The 
more  siu'ciali/ed  a  man  has  l)(,-come  in  liis  work  and 
(■:illing,  tlic  less  tilted  is  he  to  emi.;rat(.\  ]iard\'  because 
he  is  iinlikclv,  in  most  eases,  to  find  an  openini^  in  his 
own  s]ie(  :>ihv  in  the  colonies,  partix'  because  he  is  not 
suited  to  luru  liis  hand  to  uener;d  lab(jr.'' f 


>i'i-  rlu]  'Ut  li 


■■,//;,•//    (  '/A- 


192  TJic  Bargain  Theory  of  Wages. 


Adaptability,  rather  than  highly  specialized  skill, 
is  the  condition  of  success  for  an  emigrant ;  and  the 
comparative  youth  of  the  emigrants  renders  them 
much  more  adaptable. 

In  spite  of  the  fact  that  the  enterprise  and  the 
adaptability  arising  from  youth  would  prepare  us  for 
some  measure  of  trade  mobility  as  a  result  of  emi- 
gration, we  are  not  quite  prepared  for  the  apparently 
enormous  amount  of  it.  Children  form  a  large  pro- 
portion of  the  total  number  of  emigrants  and  are  a 
specially  disposable  fund  of  labor.  They  are  not  in- 
cluded in  the  occupation  returns  at  the  port  of  entry  ; 
while  in  later  years  they  are  included  in  the  numbers 
of  foreign-born  employed  in  various  industries.  We 
have,  however,  a  more  serious  movement  to  explain 
than  can  be  thus  accounted  for.  Many  emigrants 
must  actually  rise  in  the  standard  of  labor,  be- 
coming at  least  nominally  skilled  laborers;  for  while 
seventy  per  cent,  of  the  immigrants  at  the  port  of 
entry  who  have  had  any  occupation  return  themselves 
as  laborers,  more  than  thirty  per  cent,  of  the  total 
working  population  of  the  United  States  engaged  in 
mining,  manufacturing,  and  mechanical  pursuits  is 
foreign-born.*     The    foreign-born    formed   14.77  o^ 

*  The  practice  now  abandoned  liy  tlie  ]iroviiicial  governments  in 
Canada  of  giving  assisted  passages  to  agricultural  laborers  probably 
made  the  percentage  of  laborers  who  entered  somewhat  greater  than 
it  really  was.  Naturally  accurate  infiM'ination  is  entirely  wanting, 
but  there  are  several  complaints  from  trade-unionists  and  otiiers  of 
mechanics  taking  advantage  i)f  the  assistance  reported  in  the  evidence 
l)efore  tlie  Canadian  Labor  Commission.  'Die  deception  cannot  have 
been  carried  on  t<3  any  great  extent. 


Eiiiii^ratio)!  and  Trade  Mobility. 


193 


the  total  population  in  1890,  but  they  arc  more  than 
tliirt}-  per  cent,  of  the  total  en^aL;ecl  in  the  skilled 
industries.  A  \-ery  larL;'e  number  of  those  who  arc 
unskilled  laborers  when  they  arri\-e  must  within  a 
few  \x'ars  become  skilled  or  quasi-skilled  laborers. 
The  pL-rcenta^n:s  which  arc  i^ix'cn  below  may,  in 
some  cases,  include  the  unskilled  labor  emplo}'ed  in 
e\'ery  mill  and  foundi'v;  but,  after  c\'ery  allowance 
is  made,  the  unskillctl  laborers  of  I-Luro[)e  become  in 
a  short  time  skilled  laborers  in  America.  The  im- 
migrant labcM'cr 

''  comes  ready  to  take  up  any  occupation  in  which  it  can 
earn  a  livinL^;.  I  do  not  suppose  that  the  ]'"rench-Cana- 
dians  when  llicy  come  to  the  I'nited  States  enter  them- 
sch'cs  as  colton-inill  operati\-es.  Probably  they  liave 
ne\er  seen  a  cotton  mill  in  tlieir  lives.  Tliey  are  only 
potentially  cotton-mill  operatives  ;  hut  they  fdl  u]j  the 
mills  jast  the  same.  So  ver_\-  likelv  tlie  Hungarians  who 
are  imported  to  dig  coal  in  tlie  Mocking  \'alley  are  not 
miners  when  the\'  arri\'e."  * 

Althouoh  onh'  an  insio'nificant  fraction  of  tlic  im- 
mio-rants  are  skilled  laborers  when  they  arri\'e.  \-et 
the  census  returns  show  that  thirty  per  cent,  of  the 
skilled  labor  of  the  l^idted  .States  is  of  foreiq;n  birth. 
In  some  districts  the  prcjportion  is  much  hiohcr.  In 
Minnesota  it  amounts  to  47.5  per  cent.  :  in  Wiscon- 
sin, 4S.S;  in  Illinois,  43.,-;:  in  Michig'an.  43.4:  in 
Massachusetts,  35.^';   in  Rhode  Island,  30-1;   i'l  Xew 

*  rr-fi--";-  M;\y'-Siiii:ir^  F.'i:i .;->■  i!:o>!  (/;;,/  .l/i^riifii'n,  p.  127.  I 
am  al-'  iii-lfhte^l  !■>  thi-  lim.k  f..r  the  stali-tic-  (luuteil  t)eli)w. 


194  T}ic  Bargain  Theory  of  Wages. 


York,  38.7;  and  in  Connecticut,  32.4.  In  some 
skilled  industries,  the  proportions  are  considerably 
in  excess  of  the  general  average  for  the  country; 
while  the  number  of  immigrants  following  tliese 
occupations  at  the  time  of  entering  the  country  is 
very  small.  In  1886  there  were  only  twelve  occu- 
pations in  which  the  number  of  immigrants  exceed 
one  thousand,  and  in  many  of  these  industries  from 
a  third  to  a  half  of  the  employees  throughout  the 
country  were  of  foreign  birth.  Thus  there  were  in 
1886: 

TABLE  OF   OCCUPATIONS    OF    IMMIGRANTS  AT   PORT 
OF  ENTRY  AND  OF  FOREIGN-BORN  IN  U.  S. 

1SS6.  1S80.*  18S0. 

.,.w^^  PERCENTAGE    OF 

TOTAL    NUMBER 
OCCUPATIONS.        IMMIGRANTS.  WORKERS   OF 

OF    WORKERS. 

FOREIGN  BIRTH. 

J'.akers 1209  41,309    56 

Blacksmiths 1420  172,726   27 

liutchers 1190  76,241    38 

Carpenters 3678  373.143    23 

Masons 1S03  10^,473    35 

Slioemakers 1681  194,079    36 

Cigar  makers 1160  5C>,599    44 

These  are  minor  industries;  but  in  the  larger  in- 
dustries the  proportions  are  ncarh'  as  high,  while  the 
number  of  entries  is  smaller.  Of  cotton-mill  opera- 
ti\'es,  forty-five  per  cent,  were  of  foreign  birth;  of 
\\'oollen-mill  opcrati\'Cs,  thirty-nine  per  cent.  :  of 
paper-mill  workers,  thirty-three  per  cent.  ;  of  iron 
and  steel  workers,  thirt\--six  yicv  cent.  ;  of  curriers 

*  Compeiiditim  U.  S.  Census  }\cport,  iSSo,  table  103. 


Skillid  and  I  'ii  skilled  Labor. 


195 


and  leather  dressers,  f()i't)--ri\'e  i^er  cent.  ;  of  cn- 
i^niicers  and  firemen,  t\\ent\'-se\'en  per  cent.  Many 
of  tliese  industi"ies.  it  is  true,  since  the  introchiction 
of  niachinei'}-,  h,i\e  L;ra(hiall}-  l)een  coming;  to  lia\-e 
less  and  less  claim  to  the  title  of  skilled  trades;  and 
it  is  probable  that  nian\'  of  the  immii^n-ants  b(.xonic 
skilleil  laborei's  onl\-  in  name.  Thus  in  iSSo,"  of 
133,75'')  tailors  and  tailorcsses,  71,571,  or  more  than 
fift\--three  per  cent.,  wa're  of  forei^^n  birth,  and  the 
amount  of  skill  possessed  1)\"  the  victim  of  a  sweater, 
thoui;h  it  ma\-  be  sufficient  to  justif}'  the  title  skilled, 
is,  after  all,  not  \-ery  threat.  Mr.  Schloss  _i;i\-cs  lis, 
from  the  ex'idence  taken  b\-  the  Lords  Committee 
on  .Sweating',  an  instance  of  the  e\-olution  of  an  un- 
skilled emii^rant  into  a  skilled  workman.  A  witness, 
1  lirsch  l)\'  name, 


"  h:i(l  been  an  ayrieultural  laborer  in  Russia  and  had 
roine  if)  bn^land  six  nientlis  prior  to  his  a])i)earance 
betore  tlie  enniiiiittee.  He  jiresents  himself  to  a  eoun- 
tr\'iii.in  n\  hi>,  wiio  is  liiinself  a  journevrnan  fmislier  eni- 
|>h)\"e(l  b\-  a  sid)-e()ntra(a()r.  '  He  ga\-e  me  iKnhiivj;  the 
first  \\'eek,  but  lie  u'av'e  me  food,  and  he  L:a\"e  me  a  shib 
bnj;  for  the  second  v>eek  with  foml.'  'I'hen  Hirsch  is 
ad\'aneed  to  fix-e  a  week  and  now  he  is  makintj;  eight.  '  1 
st;irt  the  e\iden(:e  coutinuo)  on  Sun(la\-  morninii,  com- 
meiieuig  at  >e\a'n  and  wurk  up  till  ten.  and  tlie  other 
(l,!\s  I  stjf!  II  -i\  and  W(irk  n'uht  up  to  ten  .;>  well,  but 
oil  'riiur-,(h]\-  1  w.ii'k  up  tM  iwcbe  n'(  Inck  and  ui'i  Friday 
come  ,;^,:in  at  -ix,  then   1   wiirk  till  sun'>el.'"f 

*  Cinpeii'lium    / '.  S.  (  o;  /e.-  A',,'-, -r/,   I  .-■-i  i,  table  103. 
f  Sclil'i^-,   / 1:  ;':< '!rit!i  A'i'h:  uiii'i'ilit'ii .  y.    ill. 


196  The  Bargain  Theory  of  Wages. 


While  emigration  undoubtedly  tends  to  raise  many 
workers  from  the  ranks  of  the  unskilled  it  remains 
more  than  doubtful  whether  the  worker  is  really 
benefited  to  the  extent  the  classification  seems  to 
connote.  The  skilled  trades  which  he  adopts  are 
now,  only  in  name,  skilled  trades;  and  as  an  un- 
skilled laborer  his  first  condition  was  often,  not 
worse,  but  better. 

Trade  mobility,  then,  though  a  necessary  postu- 
late of  the  Wages-Fund  Theory,  has  never  been  a 
very  important  factor  in  the  determination  of  wages. 
Adult  labor  seldom  migrates  from  one  industry  to 
another;  and  where  it  does  move  the  results  are  not 
altogether  good.  Though  as  a  result  of  emigration 
large  numbers  seem  to  rise  in  the  scale  of  labor  the 
rise  is  often  merely  nominal ;  and  the  amount  of 
trade  mobility,  even  under  these  circumstances,  is 
hardly  sufficient  to  bring  about  the  equality  of  net 
advantages.  AIcCull(_>ch  declares  that  "  the  dis- 
crepancies that  actually  obtain  in  the  rate  of  wages 
are  all  confined  within  certain  limits — increasing  it 
or  diminishing  it  only  so  far  as  may  be  necessary 
fully  to  equalize  the  favorable  or  unfa\'orable  cir- 
cumstances attending  any  employment."'"  To 
secure  such  a  real  equality  of  re\\'ard,  the  actual  in- 
fiuence  of  the  fullest  measure  of  that  trade  mobility 
which  is  so  lightly  postulated  would  ha\'e  to  be  ex- 
erted ;  and  our  examination  has  shown  us  that  no 
such  degree  of  mobility  is  operati\'e.  Place  mo- 
bilit}-,  ^\-ithout  trade  mobility,  could  secure  only 
*  Principle  of  Political  Econo/ny  (Murray's  Reprint),  p.  124, 


Place  Mobility  and  Trade  Mobility. 


197 


that  within  the  Hniits  of  a  siiv^lc  tratlc  there  mii(ht 
be  the  world  over  a  practical  e(|ualit\'  of  reward  : 
without  trade  mobilit}-  iiiecjualities  of  returns  in 
dilferent  trades  inii^ht  loni^  continue  e\'en  were  the 
volume  of  enu'L^ratioU  very  lar^e. 

Place  niobilily,  though  not  theoretically  so  im- 
portant, is,  and  al\\a}"s  has  been,  of  more  practical 
im[)ortance  a,s  a  waives  factor  than  trade  mobility. 
The  mii^ration  of  laboi'  frcMii  one  district  to  another 
is  easier  tliaii  tile  ch.uii^e  from  one  emphiyment  to 
another.  The  conser\'ati\'e  inilucnce  of  custom  and 
tradition  oiK-rates  aL;"ainst  both  forms  of  mobility; 
but,  since  a  man's  occupation  becomes  so  much 
more  intimately  a  part  of  himself  than  the  locality 
in  which  he  liv'es,  the  chan<^c  implied  in  trade  ini- 
L^ration  is  so  much  the  o-fcater  than  that  implied 
e\-en  in  emii^ration.  There  are  other  sentiments 
which  color  a  man's  life  beside  his  trade  traditions 
and  attachments;  but  these — reliL^aon,  national 
SL-ntimcnt  and  local  patriotism,  home  ties  and 
fanu'l}-  ;'ittachments — are,  in  part,  not  sacrificed  b}- 
emiL^ratloii ;  and,  when  the\'  cannot  be  enjoyed  in 
the  new  land,  the  sacrifice  in\"ol\-ed  is  not  recognized 
till  months  ;ifter  the  change  has  been  made.  On 
the  other  hand,  the  dangers  and  drawljacl'Cs  of 
change  of  occupation  are  imnuHliati^dy  felt.  The 
dangers  are  sri  ob\'ious  that  we  may  trdce  it  for 
granted  that  the  change  will  hardl\-  e\'er  be  made 
without  the  fairly  sure  pros[)ect  of  material  ad\-an- 
tage.  -Sentiment  enters  le--^,  and  practical  ach'.m- 
ta</e  more,  into   the   moti\'es   which   lead   to   chanee 


198  TJic  Bargain  Theory  of  Wages. 


of  employment;  and  as  the  organization  of  industry 
becomes  more  complex,  the  possibility  of  advan- 
tageous change  from  one  occupation  to  another 
diminishes.  The  change  involves  the  learning  of  a 
new  trade,  and,  during  the  period  of  learning,  the 
acceptance  of  a  low  rate  of  wages.  The  average 
rate  of  wages  in  the  new  occupation  may  be  higlier 
than  the  rate  in  the  old  ;  but  the  wages  of  a  learner 
in  the  new  cannot,  if  the  trade  be  worth  adopting, 
for  a  long  time,  be  much  more  than  the  earnings  of 
the  former  occupation.  The  advantage  sought  is 
seldom  sure  enough,  or  large  enough,  to  cover  the 
risks  of  the  change;  and,  as  place  mobility  equalizes 
the  returns  in  a  trade  the  world  over,  there  will  be 
less  inducement  to  a  man  to  change  his  occupation 
to  escape  a  local  disturbance  of  wages. 


CHAPTER   VI. 


THE   M(>i;n,rrv   oi-   i.Al'.oR  (Continued ). 


BVA'0\\V.  the  Industrial  Ivcx'olution  tlicrc  was 
little  iTii;j;rati()n  of  labor:  in  ])art,  because  free- 
cloni  of  niox'enient  was  restricted  b\'  })oor  laws  and 
other  lei;islati(Mi  ;  but  also  because  there  was  less 
necessit}'  for  it.  Suppl)'  was  more  ch^sely  then 
than  now  ^"overned  b}'  demand;  production  ])eini; 
for  a  stead}'  and  a  known  market.  The  area  of  the 
mu'l^et  was  limited  antl  the  distinction  of  emplo\'er 
and  emi)lo\-ed  was  not  so  definitel}-  drawn.  Wdien, 
howe\-er,  the  ai'ea  of  the  market  extended  and  ma- 
cliinery  was  intr(Hluccd,  trade  became  sid-)ject  to 
\'iolent  tluctuations.  Demand  and  supph-  are  no 
lonL;er  in  con-espondence,  and  industry  is  alternately 
inlkited  and  depressed.  The  laborer  is  the  passive 
x'ictim  of  this  want  of  correspondence.  lie  is  no 
lon;j,'er  the  small  master  prfuluciiiL;'  for  the  known 
market,  l)ut  a  laborer  for  hdre.  lie  must  lix'e  b\-  the 
re'w, n-d  ( if  \\\>  labor  fr,  )ni  da\-  to  da\- :  and  the  tluctua- 
tion,-^  of  indu^ti'\-  tend,  o\\  the  wImK',  to  depress 
waives.      The    tluctuations    are    not    offset    b\'    each 


200  The  Bargain  Theory  of  Usages. 


other.  The  laborer's  remuneration  in  good  times 
is  scarcely  ever  sufficient  to  tide  him  safely  over  bad 
times  without  recourse  to  the  "  poor  man's  banker," 
or  to  credit  at  the  store;  for  in  bad  times,  despite 
the  equalizing  effects  of  machinery,  there  is  some- 
times great  lack  of  employment  in  the  district  in 
which  he  lives.  Since  the  laborer  must,  so  to  speak, 
deliver  the  labor  himself,  it  matters  little  that  work 
is  plentiful  elsewhere,  if  the  laborer  remains  where 
his  commodity  is  a  superfluity.  Consequently, 
mobility  is  a  necessity  for  the  ecpiation  of  the  de- 
mand and  the  supply  of  labor,  or  would  be,  were 
trade  fluctuations  merely  local.  Unfortunateh-,  as 
the  knowledge  of  industrial  conditions  in  other  dis- 
tricts increases,  the  area  of  depression  widens.  The 
same  forces  which  have  rendered  migration  easy 
make  trade  depression  uni\'ersal.  It  is  difficult, 
now,  to  imagine  any  trade  depressed  in  one  district 
and  prosperous  in  another,  as  it  might  have  been 
before  the  Industrial  Rc\' dution.  The  impro\-ed 
means  of  communication  which  naturally  promote 
the  tendency  of  labor  to  migrate  have  equalized 
industrial  cr)nditions  and  thus  destroyed  the  induce- 
ment. We  shall  sec  below  that  the  volume  of  migra- 
tion is  decreasing  and  at  the  same  time  becoming  a 
regular  movement.  We  can  hardly  speak  of  the 
circulation  of  labor  because  the  mox'ement  is  steadily 
in  one  direction — towards  the  cities. 

We  need  not  draw  an\-  rigid  di.-^tiiiction  between 
the  two  forms  of  place  mobilit\-,  migration  and  emi- 
gration.     The  political  effects  are  different,  but,  in 


Mii^ratio)i  ami  iLinii^ration.  201 


essence,  the  economic  effect  is  nearly  the  same.  It 
has  ^enerall}-  been  assumed  that  migration  is  a  much 
more  extensi\'e  nunx-ment  than  emigration  :  so  much 
more  exlensi\e  a  nujvement  that  the  whole  orthodox 
theor)-  of  foreign  trade  is  based  on  the  difference. 
To  justif}'  the  hypothesis  of  the  econ<jmic  nation  in 
the  theor)-  of  international  trade  it  is  necessary  to 
assume  that  the  mobilit\'  (jf  labor  within  the  nation  is 
practically  complete;  while  between  the  nations  it  is 
practicall}-  iu)n-existent.  I'he  assumption  is  not  even 
approximately  accurate.  The  volume  of  migration 
within  the  nation  is  not  only  not  so  great  as  is  sup- 
posed, but  is  shrinking;  and  emigration  which,  it  is 
su})posed,  is  not  sufficient  in  amount  to  bring  about  a 
real  ecpiality  in  the  cost  of  production  must,  in  some 
cases.  l)e  a  more  powerful  industrial  factor  than  migra- 
tion, l^etween  the  Maritime  provinces  of  Canada  and 
the  New  England  States  the  movement  is  steadier 
than  the  n)o\-ement  from  these  provinces  to  Ontario 
aiul  (Juebec;  and  the  city  of  Boston  Contains  a 
ver\'  much  larger  number  of  "  pro\-iiicialists  "  than 
Quebec,  Montreal,  and  Toronto.""      It  is  hardly  pos- 

*  The  aim  '>f  a  pri>tective  jT'licy,  in  the  languaj^c  of  the  orthixi.ix 
theory  Mf  fMrci;_;ii  traile,  may  l)c  said  to  he  the  i'lentiheation  nf  tlie 
economic  with  the  jioliiical  nation.  The  "National  I'oJicN-,"  aN  it  i> 
caileii  in  ('anaila,  tiiercf' ii'c  inclruied  tlie  imiirovemcnt  of  tlie  internal 
inean>  of  coinmunica;ion.  'I'iie  tahle  of  ('aiia>iian  mi_;ration  hel^'W 
sliowx  that  the  effect  .if  thi-  j.art  of  tiie  'oolioy  j.  n,,i  a;  •; 'rei  ial  .'.e,  \>\\i 
wi;!ii'Ut  it  tile  "  X.  1'."  ■.vouM  have  heen  a  L;reater  ■  ir:^'ani/e'l  inju-tice 
than  it  \v:i^.  The  n^ual  methoil  wa-.  ailniiteil  of  c.  .;nrien--a'ir,^'  one 
cla^s  for  the  >iiecial  hiinlen  )  laced  iiooii  ii  hy  piacinL;  another  eoaaliy 
heavv  liai'len   u;>i.n    >oine   oilier   cla>s    or  sccii.jn   of   the   conuuuKitv. 


202  TJtc  Bargain  TJicory  of  Wages. 


sible  to  make  a  comparison  of  the  respective  vol- 
umes of  migration  and  emigration.  The  census 
returns  of  those  countries  in  which  both  movements 
take  pLace  are  not  detailed  enough  to  permit  a 
thorough  comparison.  For  instance,  in  the  English 
census,  the  county  is  taken  as  the  unit  area:  in  the 
Canadian  census,  the  province.  The  unit  area,  in 
either  case,  is  too  large.  Probably  the  greatest 
amount  of  migration  takes  place  within  the  unit 
area.  The  English  census  of  1881  shows,  that  of 
8,877,623  persons  who  resided  elsewhere  than  in  the 
county  of  their  birth,  4,049,918,  or  nearly  half,  were 
resident  in  the  counties  bordering  on  their  native 
count}-;  and  probably  at  least  another  four  millions 
ha\'e  migrated  from  one  place  to  another  within  the 
county  of  birth.  The  same  remark  holds  true,  to 
an  even  greater  extent,  of  the  returns  of  the  Cana- 
dian census,  where  the  unit  is  the  province.  Census 
returns,  m.oreover,  can  take  no  account  of  successi\'e 
remo\'als  by  the  same  indi\-idual;  and  ten  years  is 
a  period  long  enough  to  cover  se\'eral  changes.  The 
\-olume  of  migration  must,  consequently,  especially 

Thus  Xova  Scotia  received,  as  its  compensation  for  the  manufacturing 
monojjoly  in  Ontario,  the  duty  on  foreign  coal  anil  iron.  This  prac- 
tice has  been  fnund,  in  all  countries,  politically  necer;,~arv,  Irat  is  none 
the  le-s  an  iinpo>-ihle  and  ritiicuhjus  methfjd  of  distributing  the  sec- 
tional benefits  of  protection  throughout  the  community.  The  task  of 
identif_\'ing  the  political  aiid  the  economic  nations  in  Canada,  and 
tlius  securing  a  just  distribution  <\  the  gains  and  losses  of  monopoly, 
is  ]ieculiarly  diinculi  becau'-e  there  wdll  always  be  a  greater  movement 
betv.een  ('anada  an'i  the  United  .States  than  between  Quebec  and  the 
En^bsli  brovinces  of  Canada. 


/  \>iuiiics  Co))iparcd. 


203 


in  the  case  of  CaiKuhi,  be  niucli  larger  than  is  set 
down  in  tlie  census  returns. 

Even  when  e\-ei'\'  allowance  is  made  for  the  in- 
completeness of  the  ri;_;"ui'es.  total  mi_L;ration  is  not 
so  much  greater  in  \tilunie  thcUi  enii^ralion  as  to 
justify  the  assumption  of  the  theory  of  international 
trade.  The  total  numbei'  in  an\'  ;^"i\'en  \'ear  of  tho.se 
who  ha\e  niii;r<ited,  is  not  the  same  as  the  \-olunie 
of  miL;i'atioii  in  that  \'oar;  and  it  is  the  volume  of 
mi;.;ration  that  is  the  indu.strial  factor. 

Migration,  howe\-er,  is  not  oid)-  of  less  compara- 
ti\'e  importance  as  an  economic  force  in  distribution 
than  is  assumed,  but  is  also  a  factor  of  decreasini^, 
or,  at  an\'  rate,  not  of  increasiuL','  importance. "'  The 
volume  of  mi^'ration  reached  its  maximum  ten  or 
twenty  \'ears  since;  and  the  opening;  of  new  lines  of 
communication  and  the  lessened  cost  of  transit  ha\'e 
been  appai'cntl\"  without  effect  on  the  x'olume. 
Within  the  United  States  the  \'olume  of  mii^ration 
bias  not  merel\'  been  stationarx*,  but  has  sensijjly 
shrunk.  This  is  due  in  part  to  the  fact  that  the 
colonizing;  period  in  the  histor\-  of  the  Ignited  States 

*  Acoircliiii^  to  the  liritis':  Census  Kiport,  l;i)i,  tlic  native 
pi^jnilatinn  slinw^  .-t:Ui(inary  hal'it>  of  a  \ery  licci'leil  rliaractcr.  In 
i-yr,  74.'^!  per  cent,  of  pnpulatinii  were  re>ident  in  native  county  ; 
in  is^  1 ,  75-  'o  ;   in  i  ^i)i,  74.  ^o. 

It  \vo;iM  api^ear  that  thonL;h  cniiLjrati' 'n  to  fiirti:;"!!  C(iuntries  in- 
crcasc'l  ennrniou^lv  l>i-t\vcen  i^^i  and  \'^-)\,  tlicrc  wai  im  ci  HTc-^pi  )nil- 
in^;  incria'-e  in  the  ini'_',r.uii  in  within  the  liorikr-  I'f  t'.n^hui'l  ami 
^\■ah■-^  theni-rlvo,  nn!  wiili-taiv'.ini;  thi- !ncrc."!>e'l  faciliti-- ' 'f  iMconio- 
ti'>n.  the  e.\tvn<K-di  knM\\-!edi_;c  p')--e--~e<l  hy  tlie  w^^u-'w.-^  cla<<es  a>  to 
the  condiiions  I'f  life  in  part^  nul-i'le  their  iinnieiliate  I'lealities, 
Kn^iish  Ciusuj  /wv./-;,   I :-'_)!,  \'>\.  iv.,  p.  c,i. 


204 


TJie  Bargain  TJicory  of  Wages. 


has  closed,  and  that  since  the  available  land  in  the 
West  has  been  filled  up  the  classic  advice,  "  Go 
West,  young  man,"  has  lost  much  of  its  appropri- 
ateness. It  is,  however,  not  merel}^  migration  from 
East  to  West,  or  from  State  to  State,  that  has  de- 
creased. There  is  also  less  movement  within  the 
States  and  less  movement  from  the  rural  portions  of 
the  States  to  the  cities.  The  same  phenomenon  is 
observable,  though  in  a  less  marked  degree,  in  Eng- 
land, France,  and  Canada,  as  appears  from  the  fol- 
lowing table,  which  is  taken,  so  far  as  United 
States,  France,  and  England  is  concerned,  from  an 
article  by  Prof.  Wilcox  in  TJie  Political  Science 
Quarterly.'" 


pp:rcextage  of  population  resident  in  unit 
area  of  birth  in  census. 


EN(;.  AND  WALES. 


Yea 


1.^71 
iSSl 

l8qi 


Unit 

Unit  Area. 
County. 

Year. 

Area. 
Depart- 
ment. 

88.4 

74 -04 

1 866 

75.19 

1S76 

85.7 

74. S6 

1SS6 

84. 0 

:89i 

83.2 

!      Unit 
Year.        Area. 

Province, 


I'M!  ED  STATES. 


Year. 


Unit  Area. 
State. 


I87I 

97-5 

..,0 

1 3s  I 

96.0 

t8So 

1^9 1 

95.0 

1 8  90 

i 

73.3 

77-9 

79.1 


Prof.  Wilcox  also  gives  tables  "••  of  internal  migra- 
tion  for   the    two   States    Alassachusctts    and    New 
York,  to  demonstrate  that  not  only  inter-State  but 
also  intra-State  migration  is  declining. 
*  Vol.  X.,  No.  4. 


Jlfii'/dtioii  Dtdiiti)!^;.  20=5 


PERCKXTACK  OF  TOIAI,  XA'IIXKS  OF  NFW  YORK 
RKSIDKNT  IN 

1S55.  1^65.  1875. 

County  of  hirtli 56.0   ....  55.3    ....  57.8 

Sonic  other  cmmty  of  New  York   Ic;.')   ....  17. S    ....  16,0 

Some  other  .'"'tatc' 24.2    ....  26.5   ....  2'^).  2 

n-.RCKNTAOK  OF  TOTAI,  N.\II\i:s  OF  MASSACHU- 
SETTS  RESIDENI'   IN 

1S75.  1SS5. 

Town  of  hirth 48.61  5i.O(j 

Some  other  tow  n  in  Mas^^achusetts  30.62  2(j.46 

Some  other  State 20.77  i'^-54 

The  mii^ration  from  province  to  prox'ince  within 
tlie  D(Mninii)n  of  Canada  seems  remarkably  small, 
the  reason  bi;ini;  that  the  "  exodus  "  to  the  United 
States,  as  it  has  been  called,  is,  so  far  as  the  difficul- 
ties of  and  obstacles  to  mox'ement  are  concerned, 
rcalK'  of  the  n.ittire  of  a  nn'L;"rati( )n  from  the  rural 
parts  of  a  counliA'  to  the  industrial  centres.  The 
Canadian  fiL^ures  show  a  slight  increase  in  the  amount 
of  mi_!j;rati(Ui,  but  di>  not  form  a  serious  excej:)tion  to 
the  L^eneral  tendency;  for  the  peri()d  co\"ered  is  that 
in  which  the  _j;-reat  railwa}-s  ha\'e  for  the  first  time 
opened  up  tlie  countr\'.  The  tal)le  on  p.  206  shows 
the  numbci-  per  tlmusand  resident  in  eacli  of  the 
fotir  (^ri'^inal  pro\-inces  of  the  Dominion,  in  the  three 
Cen-^iis  \-cars,  who  were  born  in  the  \ariotis  pro\'inces 
of  the  1  )oniinion. 

TlK'<e  art.'  hardi]\-  the  re-^tilts  we  should  ha\-e  ex- 
pected.     The  period  co\'ered  b\'  these  statistics  is  a 


2o6 


TJic  Bargain  Theory  of  JJ'ag-fS. 


period  of  railroad  expansion  ;  great  trunk  lines  have 
been  built  and  parts  of  the  countries  which  had  been 
separated  more  completely  than  if  the  ocean  had 
rolled  between  have  been  bound  together  by  ties-of 
intercourse  and  communication.  The  receipts  from 
passenger  traffic  ha\-e  increased  year  by  year  until  it 
seems  as  if  the  whole  population  were  continuously 
on  the  move.  With  improved  means  of  communi- 
cation has  come  increased  knowledge  of  the  con- 
ditions of  industry  in  other  districts  and  States;  but 

THE  NUMBER  PER  THOUSAND  OF  XATIVE-RORX 
CANADIANS  RESn)ENr  IN  THE  FOUR  ORIGINAL 
PROVINCES  AND  MANITOBA  ACCORDING  TO  THE 
PROVINCE  OF  ]>IRTII. 


PROVINCK    CI 
KESIIJF.NCH. 


CENSr: 
VEAK. 


rKO\-IN-CE    r.F    lilKTH. 


New  Brunswick - 


Nova  Scoiia. 


Quebec. 


Ontario  , 


1S71 
i3Si 

iSyl 
1S7I 

iSSi 
iSgi 
1871 
I -9 1 


10.7  057-4 
12.0  056.2 


21 


0.6  o.  , 

O.Q  I.O 

1-7  1-3 

6.2  crji.3' 

S.o  oSy.8 

1 1.0  085.9 


1     1^71 

i8'",i 

^  11:^ 

9.5   Qbl 

■:.      .5S2 
o  q8i 


10 


o. 


S  'J* 

3-s) 
4.0 


. — '- 

J.I 

\I 

0.0, 

0.0 

0.0 

0.' 

o  o 
0.0 
0.0 
0.0 


0.6 

75-4 

59.  f 


*  lucluclini:  native?-  of  NewfouncUand. 


J\Ioi{ir)i  l\iSt)iitio)is  on  Mobility. 


207 


miL^ratioii   scciiis  to   ha\c   reached  a  niaxinuim  just 
when  it  was  ht-iiiL;'  I'riukTcd  easier. 

The  result  is  sMUKwhat  surprising'.  Tliere  is 
ahiiost  CiinipK'te  fre'ccioni  of  nu)\enient  permitted. 
The  laljorer  is  no  l(in_L;\i' hampered  in  liis  mo\'ements 
1>\'  hiws  of  settlement,  but  ma\-  mo\"e  wherex'er  and 
whenewr  he  thinks  tit.  In  some  [)l.ices  old  medi;e\-al 
ideas  re>trict iiiL;  the  riL;ht  of  mi_L;ration  have  sur\a\'ed 
or  been  re\-i\ed  and  enforced.  The  c<jnser\"ati\'e 
reaction  in  (ki'man\'  rex'eals  itself  in  proposals  to 
restrict  the  mii^rations  of  tlie  aL;'ricultural  po[)ulati()n. 
I'.ast  Prussia  has  l)een  drained  of  a  lar^e  part  of  its 
a^i^ricullurcd  labor;  and  the  or;^ans  of  the  threat  land- 
o\\-ners  demand  renewed  restrictions  on  the  pretext 
that  so  lon;^-  as  fret'  mii^i-ation  is  permitted  there  can 
be  no  ade([uate  check'  to  the  spread  of  epidemics. 
The  modern  demands  for  restriction,  howex'er,  ci^mc 
chi^,  tly  fi'om  the  woi-kini;'  classes.  America  for  the 
.Americans,  Canada  for  the  Canadi;ins,  London  labor 
for  London  labm'ers,  are  crie's  which  demand  resti'ic- 
tion  of  iniL^ration.  in  fact,  if  not  in  law.  It  is  fre- 
(|uentl\'  little  more  than  a  sentiment;  Ijut  in  demo- 
cratic countries  the  sentiment  is  sometimes  embodied 
in  lei;"islati()n.  h\  Canada,  there  lias  been,  in  places, 
a  reincarnation  of  meili;e\al  ideas  reL;"ardin_L;"  tlic 
i-iL;ht  of  mo\-ement.  Li  I'redericton  and  St.  John, 
N.  1).,  and  eLewlurc,  a  tax  of  twintx'  dollars  is 
lexied  upon  imported  laboi'.  The  ar;j,ai  nidi  t  is  that  it 
i-  not  fair  thai  tho-;c  who  re-id;'  in  the  cit\-  an.d  pa\- 
their  proper  ^hare  of  the  taxes  ^iDuld  be  exposed 
to  tlK'  Competition   of  outsitler>   who   may  come  in. 


2o8  The  Bargain  Thcoi'y  of  Wages. 


earn  wages,  and  depart  without  ever  being  domiciled 
in  the  city  and  subject  to  taxation.  In  the  spring 
of  1896,  there  was  a  dispute  in  St.  John  between 
the  Ship-Laborers'  Union  and  the  managers  of  the 
Donaldson  Line  of  steamers.  The  managers  refused 
to  grant  the  Union  demand  for  higher  wages  and 
imported  a  trainload  of  men  from  Montreal,  which 
was  then  icebound.  After  partial  failure  of  the 
attempt  to  bring  the  "blacklegs"  "out,"  the 
Union  threatened  to  have  the  city  by-law  enforced. 
There  was  some  talk  of  appealing  to  the  courts 
against  the  by-law,  v/hich,  it  was  claimed,  was  a 
violation  of  the  British  North  America  Act ;  but  no 
further  steps -'  were  taken,  and  the  result  was  a 
victory  for  the  Shiji-Laborcrs'  Union. + 

The  gro\\ing  strength  of  local  patriotism, combined 

*  Since  tlie  above  was  written  the  city  by-law  of  St.  Jolm  has  Ijeen 
amended,  and  the  tax  or  licence  fee  ]  aid  by  iion-resideiit  haljorhas  been 
reduced  to  seven  dobar,^  and  a  lialf,  or  about  a  d>bar  more  tlian  a 
Laborer  pay«  for  his  \)''\\  tax. 

f  The  Contract-Labor  I.a\\'  in  the  United  States  is  an  instance  of 
tlie  same  tendency,  altlii.uch  the  object  of  this  measure  is  to  re>trict 
the  riL;ht  u{  immi^rati.  in  ;  Init  llie  (Joili.-s  bib  may  be  cla>sed  as  a 
rnea-ure  whfise  object  v.a--  really  to  re-trict  the  !iL;ht  of  migration. 
The  measure  [Tr.j-n-ed  to  fi^rbid  anv  man  frnm  eaiiiin::;  waives  in  the 
United  States  who  didi  not  re^id(;  there.  It  ir,  to  lie  hoped  that  the 
advocates  of  the  mea-ure  ddd  not  ba>e  tlicir  siipoort  of  it  upon  the  ac- 
curacy of  a  petition  in  favor  of  it  pre-ented  by  citizciis  "f  the  United 
States  livinc;  clo-e  to  the  Cana'lian  liorder.  The  jietiti'm  averred  that 
l>etween  two  and  three  hundred  :hi:i;~a;:d  '  'anadian-  crossed  th.e  border 
every  morniipc^  and.  after  earnint^'  the-  hiLrher  rate  of  wn^^'es  in  the  States, 
cro'-^ed  back  aijain  at  nii^ht  to  tiieir  L'ana'baTi  li'ime-^a  number  \',  hich 
];rol)abIy  exceeds  the  total  population  of  iJanada  living  within  five  miles 
of  the  border  line. 


The  Causes  of  Decline  of  Migration. 


icxj 


with  the  incrcasin;4  political  power  of  the  working 
classes,  has,  of  late  \'eafs,  teiulecl  to  reduce  the  vol- 
ume of  nii^M-atioii,  but  hard!}'  sufficiently  to  account 
for  the  tliniiiuition  exhibited  in  tlie  tables  i^iveii 
abo\e.  The  decline  of  migration  is  possildy,  also, 
in  j).u-t  due  to  the  increasiiiL';  tendency  towards  locali- 
zation of  inilustrw  Where  an  industry  is  sti'ictly 
localized,  niiination  offers  no  escape  from  trade  de- 
pression ;  and,  altliou^di  it  sometimes  appears  as  if 
an  industr\-  were  localized  in  moi'C  districts  than  one, 
\'et,  on  examination,  the  industry  is  seen  to  be  two 
or  three  tlifferent  industries  included  under  the  one 
name.  The  localization  of  industry  promotes  the 
ori^anization  of  labor  in  trade-unions;  and  we  liave 
seen  that  the  trade-unions,  if  the\'  do  not  positively 
discourage,  ci'rtainly  no  longer  encourai^e  the  mig'ra- 
tory  tendenc}-  by  travellin*^  benefits."  In  one  way 
the  union  undoubtedly  doe-s  ])romote  migration  in- 
dire-ctl\-.  The  standard  wajge  is  hi_L;"her  in  the  cities 
tlian  in  the  countr\-,  and  the  best  woi-kiM's  seek  the 
centi'es  of  p.opulation  and  industr}' ;  wliile  those  who 
are  unal^le,  from  am-  cause,  to  earn  the  standard 
wai^e  in  tlu:  metropolis  and  find  it  difficult,  on  ac- 
count of  the  ti"ade-union  antipathy  to  a  s}'stem  of 
c;"ra(_led  waL'.es,  to  obtain  an\-  em})]o\'ment,  tend  to  mi- 
L,M'ate  to  the  pro\-inces. 

Ai4"ain,  if  it  be  tiaie  that  a  lar^'er  pro[)orti(^n  of  the 
woiTdiv^'  classes  are  aimiiv^'  at  ownitvj,"  their  own 
houses,  this  \\-ould  uiuloid)ted]\-  tiMid  to  hinder 
miL;ratii)n.       The    e\-idence    is   too    fra^nientar)-    to 

*  C'liaiilc-r  \  .,  p.   I  79. 


210  The  Bargain  TJicory  of  Wages. 


allow  us  to  decide  whether  they  do  so  aim.  If  they 
do,  \ve  need  not,  as  some  writers  and  speakers,  regret 
the  tendency."  ^Mobility  does  not,  on  the  whole, 
tend  to  promote  good  citizenship.  Ownership  un- 
doubtedly implies  greater  fixity,  and  in  so  far  as 
every  trade,  and,  in  a  special  degree,  localized  trades, 
are  still  subject  to  local  variations,  fixity  of  residence 
ma\'  imply  fluctuations  in  wages  and  emplo\-ment. 
On  the  other  hand,  when  trade  revives,  the  man  on 
the  spot  is  likely  to  reap  the  immediate  benefits.  A 
priori,  we  might  conclude  that  mobility  will  secure 
an  arithmetical  equality  of  wages  and  emplo\-ment; 
that  the  wages  of  those  who  reside  permanent]}-  in  a 
district  will  fluctuate  more  according  to  the  state  of 
trade,  and  that  their  average  will  be  higlier  than  the 
a\'erage  r)f  those  who  move  from  place  to  place;  and 
this  ^^/r/i'r/ conclusion  is  supported  by  the  following 
comparison  of  the  two  classes  of  owner  occui)iers 
and  tenant  occupiers  in  respect  of  wages  and  days 
emi)lo}-ed  in  the  }-ear,  whicli  is  taken  from  the  report 
of  the  Ontario  f^ureau  of  Industries  for  IcSSq.  The 
comparison  co-vers  a  sufficientlx'  \\'ide  area  to  secure 
that  accidental  wariations  do  not  much  influence  tlie 
results.  In  1 888  returns  were  received  from  576 
owner  occupiers  resident  in  twenty-one  towns  in 
different  parts  oi  the  pro\-ince,  and  in  1889,  842. 
The  tenants  in  1888  numbered  1272.  aiid  in  1889, 
1634.  Another  class  is  iiicluded  in  the  first  table, 
viz.,  boarders,  but  the  number,  forty,  is  too  small  to 

*  Set:  tlie  refcieiice   to   Bisliup   Fraser  of  Mancliester,    in   Price's 
Ii!j'ust>-ial  Peace,  p.  1 14. 


Touvits  and  O'iOurs. 


21  I 


admit  any  inference.  The  l)()arilers,  probably,  arc 
found  mainly  in  the  larj^er  towns  where  the  average 
^\■aL;e  is  CDmparatix'ely  hiL;h. 

COMI'AKA  riVi:     TAI'.I.l-:  OF  KAKXIXC.S    AXD    I)A\'S  KM- 

i'i.()\i:i)  IN  liii-:  \v.\K  i-s<),  FROM  RirrrKNs  y].\\)V. 

\\\    ^F\L1•,    \VURKFR>,  C)V1:R    SFXTEFX,    WFFil    J)F- 
FFXDI.Xl'S. 


SI  Al  IS. 


M'Mr.i:!-;  ov 

Ki:  IIKNS. 


DAYS   I-Mri.OVKD 
IN   VI.AK. 


TOIAI.  KAKNIN(;s, 
INCI.I  DI.M;  1  11():iK 
<il'   DIJ'I'ADl'.N  IS. 

(  >\viv..'rs S42 272.06    84^17. ''7 

■r<-"^-i'its i(,;,4   2t,<j.34   449-33 

ISuardcrs 40    265. So    45"''j3 

The  second  table,  with  the  acconip;in\-in_q-  dia;^ram, 
is  intended  to  show  the  local  and  temporary  \-aria- 
tiiuis  of  wa^es  aiul  time  employed,  of  each  of  the 
two  classes  in  the  two  ycirs  iSSS  and  18S9.  The 
awra_oe  of  waL;"es  and  time  employed  therein  set 
down  is  the  a\'erao\'  of  tjnj  two  years,  not  of  1SS9 
aloiu-,  as  in  the  fii'st  table. 

We  find  fi'iim  the  comparison  (li  that  for  the 
tenant  occupiers  thei'c  are  fewer  fluctuations  abo\'e 
or  below  tlu:  a\"ei'a;j;e  either  in  respect  of  \\-a;j;es  or 
of  the  number  of  da\'s  employed  durin;^  each  \'ear : 
from  which  we  ma}-  conclude  that  the  [greater  the 
mol)i]it\-  of  labor  the  stronger  the  tendenc}-  towards 
an  ai'ithmetical  a\-era;j;e.  We  fmd  (2i  that  tlu:  a\aa-- 
a'_;'e  wa'j,"e  of  the  o^A•n^M'  and  the  axa-raL^f  of  the  num- 
bt,'r  of  da\"<  emplo\a'd  are  considerably  higher  than 
the  cori'espoadiiv^  a\'era;_;'e  foi'  the  occupiei",  from 
whicii  we  ma\-  justh-  conclude  that  permanence  of 


12 


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TJie  Bargain  TJu-ory  of  Wages. 


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Levelling  Up. 


213 


residence,  which  is  ;uhnittedly  desirable  from  a 
social  and  ethical  point  of  view,  is  not  an  economic 
drawback.  We  nKiy  therefore  dismiss  the  fears  of 
many  phiIanthroi)ic  economists  and  publicists  that  if 
the  working;"  classes  own  the  houses  they  li\-e  in,  they 
must  necessarily  be  in  a  worse  position  as  bargainers 
in  the  labor  market." 

The  ri-al  cause  of  the  diminution  in  the  volume  of 
migration,  to  which  the  social  phenomena  already 
mentioned  are  only  contributor}-  causes,  is  that,  im- 
pro\'cment  of  the  means  of  communication,  which, 
at  first  si;4ht,  seems  to  facilitate,  does  not  reall\'  en- 
courage mi;j;ration.  The  impro\'ed  nieans  of  com- 
munication lia\'e  le\'elled  wages  up  to  such  an  extent 
that  differences  in  wages  are  no  longer,  to  a  large 
extent,  at  least,  accidental,  l)ut  in  a  measure  corre- 
spond w  ith  differences  in  eihciencx"  and  with  differ- 
ences in  the  cost  of  li\"ing.  'Idie  decrease  in  the 
\-olunie  of  migration  d(^es  not  mean  a  slackening  of 
com[)etii«)n.  TJie  iniluence  of  com]x;titi;)ii,  on  the 
contrary,  has  outstripped  the  actual  mobilit\-  of 
labor.      As  between  good   pku'crs  the  game  is  often 


*  1  hei-c  is,  ill  snme  jiiarc-^,  a  conviction  am^mi:;  tlie  workini;  classes 
that  a  l.iii  'I'cr  wiio  own--  hi^  hnuxc  is  at  the  ^anie  ili-ailvan'.a;_;c  as  the 
h\li.'rer  who  i--  C' >!niit.Hc'l  to  live  in  a  hou^e  jiroviiic'l  aiul  owneil  by 
liis  eniphi\cf,  anil  sonietinie^  at  a  wor>e,  lor  a  c-'nijiam'  tenant  is 
i;ei":rf,>Iiy  ;  iri-lciTcd  w  hrn  w  "ik  is  scarce.  In  a  small  t^-Aii  thelaiiorer 
ina\-  he  1  rait ;  mHv  at  the  mercy  of  an  nn-cni;  ■;i!ou>  rni;hi}(jr,  and. 
tho!n_;h  the  ca~e-  \\\x\  he  fe\'.'  in  which  --uch  an  lin^ci'uiiiih  ms  i;-.e  of 
(lower  is  mall-,  when  >uc!i  an  ahc-e  wccnr--  a  ^M-a\e  >ocial  crime  is 
c. 'mmitted.  r.'-.  i.n  this  point  Report  oj  CoiDtc'ticiit  Labor  Bureau, 
1385.  Y\K  S4.  S5. 


214  '^^^^  Bargain  TJicory  of  Wages. 


decided  by  a  show  of  cards,  so,  without  recourse  to 
the  actual  step  of  migration,  competition  has  levelled 
wages  up  and  removed  the  necessity  of,  and  induce- 
ment to,  migration.  The  knowledge  that  change  is 
always  possible  has  at  the  same  time  weakened  the 
desire  for  change  and  the  economic  need  of  mobility. 
]\Ir.  Garnier  declares  that,  in  England  at  least,  what- 
ever may  be  the  case  in  Scotland,  the  system  of 
}-early  hiring  of  agricultural  laborers  induces  more 
men  to  wander  from  master  to  master  at  the  annual 
hiring  fairs  than  a  system  of  weekly  contracts  does. 
The  weelv'ly  contracts  with  their  cottage  laborers, 
strange  to  say,  seem  to  promote  more  settled  habits. 
These  latter  men,  feeling  that  they  can  leave  if  they 
choose,  elect  to  stay."  "  Similarly,  the  knowledge 
that  the  Bank  had  power  to  suspend  the  Bank 
Charter  Act,  has  twice  allayed  a  panic  without  the 
necessity  of  actual  suspension.  Competition  acts  on 
the  minds  of  men;  and  the  same  results  may  be 
achieved  either  b\'  actual  display  of  power  or  by  the 
knowledge  that  the  power  is  there  if  need  arise. 
One  instance  must  suffice.  The  amount  of  migra- 
tion +  between  Ontario  and  Quebec  is  not  \-ery  great, 
and,  since  the  majority  of  the  migrants  are  resident 
in  a  few  border  counties,  is  actually  less  than  it 
appears,  yet  there  has  been  a  stead}"  levelling  up  of 
the  a\X'rage  wages  earned  in  Quebec  to  the  a\'e-rage 
earned  in  Ontario.  If  ^\•e  take  the  average  wage  in 
Ontario  in  each  of  the  three  census  \-ears  187 1,  1 88 1, 

*  Oariiier.  Atuials  of  tlw  British  Peasantry,  p.  415. 
f  Cp.  laljle,  i>.  206. 


]\Iii:;ratio)i  an  licoiioiiiic  MovcDiciit.  215 


1891,  as,  ill  each  case,  eciuix-aleiit  to  one  hundred, 
the  corres[)ondinij  avei"aL;es  for  Quebec  are  as  fol- 
lows "  : 

(i.NTARIi).                               QUKHEC. 
1S71 KX)    73 

iSSi 100   83 

iStji 100   90 

So,  if  miL,M-ation  is  decreasini^  in  \-olunie,  and  mobil- 
it\-  is  no  Ioniser  the  important  wa^es  factor  it  has 
been  conccix'ed  to  be,  the  result — competition — is 
still  bein;4  accomplishetl. 

Mii^ration  arises  from  a  more  pureh"  economic 
motix'e  than  emi^n'ation.  The  \-olume  of  emii;rants 
fr(^m  I'Lurope  is  still  swelled  from  year  to  year  by 
tho-e  \\'hose  motixes  for  chan;^nng  are  pr)litical  or 
S(.>cial,  or,  at  times,  e\'cn  relii^ious.  The  political 
motix'e  is  almost  entirely  absent  as  an  incenti\-e  to 
mii^ratioii,  thouL^h  social  moti\'es  ma\'  induce  many 
to  seek  the  larL;e  cities.  There  can  be  no  doubt 
that  all  "  that  makes  the  difference  between  Mile 
haid  fair  on  a  Saturda}'  ni^iit,  and  a  dark  and 
muddy  t-ounti'\-  lane  with  no  L,dimmer  of  lii^'ht  and 
with  nothini;  to  d^  >, ' '  •!•  has  souiethinu;  to  do  with  the 
x'olume  of  nn'^i'atiou  ;  l)ut,  in  tlie  main,  mi^u'ation  is 
an  economic  mo\-ement  undertaken  \\\\\\  a  deliberate 
idea  ot  l)',tlei-iii^'  the  mateiTil  condition.  ddiei'e  are 
element--  in  the  mii\-eme-nt   which  are  not  econt)mic. 

*  i'lK^n;   '/  (.\:it :  !a .   i^ii,   nulle;i:i  x\-iii..  p.  >. 

■|   1!.   I,i(-'v  cH\n  smiih,   I'.-tli'-  I  .i !  r  at:!  I  .ai>  ^r  of  the   People    vol. 
iii.,  1'.  75  :   ./.   /./'"■  i>:  0:a-   /  V/.'/^'.-v,  Cliaiitur  I, 


2i6  TJic  Bargain  Theory  of  Wages. 


There  is  the  drift  of  the  tramps  and  the  beggars  and 
the  characterless  to  the  great  cities  where  odd  jobs 
and  charity  and  obhvion  may  be  found.  The  move- 
ment of  women  is  only  partly  due  to  economic 
causes;  and  women  form  the  majority  of  those  who 
migrate.*  The  general  direction  of  the  economic 
movement  has  been  the  rural  districts  to  the  cities, 
though  tliere  has  also  been  a  reverse  movement 
back  to  the  country.  The  volume  of  the  migration 
from  the  towns  to  tlie  country  (not  including  in  this 
volume  the  great  modern  mo\'ement  of  population 
tovi'ards  the  suburbs  of  the  cities)  cannot  be  great 
since  it  is  a  movement  of  the  old  and  the  successful. 
As  the  young  and  x'igorous  move  towards  the  towns 
where,  though  the  cost  of  living  is  high,  wages  are 
proportionately  as  high  and  seem  higher:  so  the  old, 
who   have   retired    from   active  work,   move  to  the 

*  The  limited  number  of  em|)loyment.s  open  to  women,  and  the 
localization  of  most  of  these  within  narrow  areas,  have  tended  to  in- 
crease the  volume  of  female  migration.  The  excess  of  females  in 
textile  towns  is  not  due  to  an  exodus  of  the  males,  but  to  migration 
from  the  surrounding  districts  of  families,  tlie  majoritvof  the  children 
in  which  are  girls.  The  practice  of  depending  in  part  for  the  fannly 
suppcirt  on  the  supplemental  earnings  of  the  regular  or  casual  work 
of  the  wife  and  children  sometimes  checks  migration  from  the  districts 
where  there  is  a  demand  for  female  labor  and  generally  promotes  migra- 
tion to  such  a  district.  .V  laborer  who  counts  on  tlie^e  suiiplemental 
eai'nings  may  not  always  fallow  his  own  individual  ecnnomic  ailvantage 
and  g(5  ^\here  there  is  the  greatest  demand  for  his  labor  ;  because  in 
the  new  locality  his  wife  and  dar.gliters  could  liiid  no  emphiyment. 
On  the  other  hand,  he  mav  move  to  a  district  where  the  demand  for 
Ids  labor  is  less  in  order  to  find  employment  iox  a  growing  fannly  of 
daughters. 


Migratio)i  to  Cities  an  Adult  Movcuioit.       217 


country   to    take    advdnta^c    of    the    lower    cost    of 
living;". 

The  movement  towards  the  cities  is  an  adult  move- 
ment. Uniler  modei'n  industrial  contlitions  the 
s\'stem  of  a[)[)renticeshi[)  is  breakin;^  down  and  no 
substitute  has  }-et  l^een  found.  It  lias  broken  down, 
howexer,  oid\-  in  tlie  ku'i^^e  cities  and  industrial  cen- 
tres. In  the  work>hoi),  in  the  country  xillaj^e,  the 
apprentice  is  still  faithfully  taui;ht  the  \\hoIe  art  and 
craft  of  his  trade;  and  he  IccU'ns  n.ot  a  special  de- 
partment, but  the  whole  tratle  as  it  could  not  pos- 
sibl}'  be  learned  in  a  lar^e  city,  even  in  shops  where 
apprentices  are  taken.  The  demand  for  trained 
artisans  in  the  cities  is  -^reat  ;  and,  since  in  the  city 
work>hops  a[)prentices  are  no  Ioniser  trained,  the 
demand  must  be  met  from  the  outside.  The  move- 
ment to  the  cities  is  pM"iiduced  b\'  "  suction  froin 
within  "  rather  than  1j\'  "  pressure  from  without." 
It  is  not  because  trade  is  depressed  in  the  cmmtiy 
but  because  the  dcin.md  is  so  i;reat  in  the  town  that 
the  nund.)er  of  trained  workmen  mii^i'atiiii;'  to  the 
cities  is  so  lari;"e.  If  the  town  were  n(/t  recruited 
from  the  countr\-,  industry  would  kmi;"uish  and  frdl. 
The  conditions  of  town  life  are  so  debilitating^  that 
were  it  not  that  the  cit\"  population  is  beini^^  coiitin- 
uou^l\-  iiuiL^or.tted  1)\-  tlu:  infusion  of  fresh  country 
bli)otl  the  citi'.'S  would  soon  beconu;  iiu!usti'ia!l\-  in- 
eltecli\-e.  Tlie  economic  debt  wliich  the  cilie,--  owe 
to  the  rui'al  districts  is  incalcukible.  Tlu)"  receive 
the  tk)wer  of  tlie  industrial  ;u'm\-.  The  u;reat  pro- 
portion of  the  migrants  t(j  the  city  are  between  the 


2 1 8  TJie  Bargain  TJicory  of  Wages. 


ages  of  fifteen  and  thirty.'"  London  receives  such  a 
number  of  migrants  between  these  ages  that  the 
percentage  of  her  population  between  these  hmits  is 
much  higher  than  the  corresponding  percentage  for 
the  whole  country.  The  migrants  are,  as  might  be 
expected,  markedly  successful.  The  poverty  in  the 
various  districts  of  London  is  almost  in  an  inverse 
ratio  to  the  proportion  of  provincials  resident  in  the 
district.  Where  the  dark  colors  are  laid  down  in 
Booth's  map  of  London  poverty,  there  is  resident 
only  a  very  small  percentage  of  immigrants  from  the 
country.  The  reason  is  tliat  the  migrants  are  picked 
men,  and  in  competition  with  city-bred  labor,  can 
easily  secure  the  best  positions.  The  percentage  of 
failures  amongst  them  is  surprisingly  small. 

Mr.  Ravenstein  has  put  forward  a  law  of  the  move- 
ment which  he  calls  the  law  of  migration  by  stages. 
lie  found  that,  according  to  the  English  census 
returns,  the  amount  of  migration  was,  roughly, 
inversely  as  the  distance  of  the  migrants  from  their 
counties  of  birth;  and,  from  this  fact,  he  drew  the 
conclusion  that,  in  spite  of  the  great  attractions  of 
large  cities,  the  set  of  migration  is  rarely  directly 
and  immediately  to  them.  The  migrant  seems  to 
ai)proach  gradually,  resting  by  the  way  to  make  surer 
of  his   footing,   and,   as   it   were,  to   hesitate  befcM'e 

*  It  is  siLjnificant  that  ci!j;lity-thrce  per  cent,  of  the  failures  (jceur 
aiii'iiit;  tlio^e  who  left  their  homes  after  reaching  the  aijc  of  twenty- 
five,  llotli  for  the  niiL;rant  and  the  eniit^rant  twenty- fi\c  seems  to  he 
tlie  limit  ai;e  for  wliich  success  is  possible.  After  that  year  the  in- 
dividual seems  to  lose  the  eneri^y  and  the  adaptability  which  are 
essential. 


Mi];^- rat  ion  by  S/(rj[rs.  219 

niakiiii;'  the  i)lun;^c.  Many  nc\-cr  reach  the  destina- 
tion, but  remain  at  some  of  the  intermediate  statues. 
Short-ch'stance  miL^ration  is  much  more  fre<[uent  than 
lon<;'-distance  mii^ration.  Air.  Llewell}-n  Smith  •• 
has  iiv^eniously  ilhisti'ated  and  supj)iemented  Mr. 
Kaven^tein's  theoi'}- b\- di\'i(HnL;  ICnghmd  and  Wales 
into  a  series  of  rini;s  of  counties,  in  a  rouj^hly  semi- 
circular arran_i;"ement  round  London,  to  show  how, 
the  L^'reater  tlie  distance,  tlie  smaller  the  nundjer  of 
mii^rants  to  London.  The  results  are  t^iven  in  the 
foUow'ini,^  tcdjle  : 

NUMIIKR  OF  PKKSOXS  IT.R   lOOO 
AVF.RACa-.    I)  STANCE 
RING.  OF    I'OITI.AIION   OF    FACU 

FROM  LONDON. 

RINC  LIVING  IN  LONDON. 

1    23. S   miles    166.0 

2    5-5     "        121. 4 

3    90.9     "        61.2 

4    126.0      "        32.0 

5    175.7     "        iC'-2t 

*J    236.9     "        24.9 

As  a  further  illustration  of  AL-.  Rax'cnstcin's  law, 
Mr.  Sndlh  shows  that  the  a\'eraL^e  a_o'e  of  the  mis^a'ants 
from  the  moi'e  distant  rin^s  is  hi!_;"her  than  the  a\'er- 
aoe  a;4'e  o(  those  who  conu'  from  the  home  counties. 
\{  l'Mu;'-distance  nd;4r;ition  talces  place  h\'  staj.(es  it  is 
ol)\-ious  that  the  ai^e  of  the  loni^'-distance  mii;'rant 
will  be  somewhat  al)o\-e  the  a\'eraL;'e  ai;'e  of  the 
niiL;"rants  when  he  ri^-aches  London. 

*  n^H'th,  (\".  (■//.,  v.>l.  iii..  p.  d;  ;    -cc  al-"  /'■!,/..  \\  126. 
f  'I'hc   figures  JK-fc  sh.iw  the  lii'-turliiiiL;  intliifiuc  uf  tiu-  attraction 
of  tilt;  m:imif;uturinL:  centres  dl  I  .aiicushire  aiul  \\)rksliire. 


220  TJie  Bargain  TJieory  of  Wages. 


PERCENTAGE  OF  MIGRANTS  DITTO  OVER 

•  UNDER  TWENTY.  TWENTY.  DISTANCE. 

1    22.4    77.6    23.8 

2   iS.i  81. g   5-2.5 

3   16.8  83.2   Q0.9 

4   15.4  84.6  126.0 

5   191  S0.9* 175.9 

6 15-9  84.1    236.9 

The  law  of  migration  by  stages  must  be  slightly 
modified  to  take  account  of  facilities  of  access  and 
travel.  There  is  a  larger  proportional  movement 
from  Scotland  to  London  than  from  Scotland  to 
Birmingham  or  Leeds.  London  seems  much  nearer 
than  Birmingham  and  its  attraction  is  much  more 
actual.  \\\  general,  where  there  is  communication 
by  water  there  will  be  a  relatively  greater  migration. f 

The  exodus  from  the  rvLnitime  provinces  of  Canada 
has  most  of  the  characteristics  of  a  migration.  The 
emigrants  go  to  a  country  where  their  own  language 
is  spoken  and  the  same  customs  are  observed;  and 
the  direction  of  the  movement  is  towards  the  large 
cities.  \\\  this  case  the  law  of  migration  by  stages 
is  again  partially  set  aside  on  account  of  facilities  of 
access.      The  migration  is  not  to  the  State  of  Maine, 

*  The  figures  here  show  the  disturliing  influence  of  the  attraction 
of  the  manufacturing  centres  of  T.ancasliire  and  Yorksliire. 

f  The  greater  jirojiortion  (/.  c,  of  migrants  to  London),  consider- 
ing distance,  is  that  shown  by  Devonshire,  Somerset,  Dorset,  and 
Cornv.ail,  wliich  collectively  send  24.7  per  cent,  of  tlieir  migrants 
into  London.  Here  tlie  geographical  situation,  giving,  practically, 
only  one  di-gree  of  freedom  of  movement  to  the  migrant,  is  doulitlcss 
a  great  operative  cause.  In  general,  it  will  he  found  that  a  dis]iropor- 
tionate  amount  of  migration  takes  place  to  London  from  counties 
with  a  seaboard.      Booth,  op,  cit.,  vol.  iii.,  p.  72. 


Distribiilion  of  Canadian  Iniuiigrants.         22  1 

which  <^ct)<;"iaj)hicull)-  Hcs  nearest  to  the  Maritime 
prox'inces,  but  to  the  State  of  Massachusetts.  In 
the  State  of  Maine  are  found  52,076  Canadians;  in 
tlie  State  of  Massachusetts  207,601. 

The  elistribution  of  CanacHans  in  the  United  States 
is  as  fcjllows  : 

North  Atlantic  ilivision 490,229 

South  Atlantic  (livi>ion 5.412 

North  Central  division 4()i/)G(j 

South  (.'cntial  division 8,153 

\\'estt;ni  division 75,484 

United  States 980,933 

The  mi<^ration  to  three  of  those  chvisions  is  too 
small  to  be  f;o\-erned  by  any  disco\-erable  law  excej)t 
the  law  of  health-seeking.  h\ill\-  one  fifth  of  the 
Canadians  in  the  South  .Vtlantic  division  are  resident 
in  I'dorida;  and  more  than  a  third  of  those  resident 
in  the  South  Central  di\ision  ha\-e  souoiu  Texas  to 
prolong  their  da}'s.  In  the  Western  di\ision  26,028 
ha\'e  fled  to  Calif<M-nia  fr(.)m  the  rigors  of  the  Cana- 
dian winter.  The  details  of  the  other  two  di\'isions, 
according  to  .States,  gix'C  rather  contradictor)-  re- 
stdts.  The  attractii^n  to  the  Xorth  Atlantic  di\ision 
is  towards  the  industrial  and  manufacturing  States, 
which  are  as  different  as  possible  from  the  Maritime 
pro\'inces  of  Xew  l^ruiiswick,  Xowa  Scotia,  and 
Prince  lulward  Island.  Xew  ^'ork  and  Massachu- 
setts togL'thcr  absoi'b  three  fifths  <  d'  the  total  migra- 
tion. In  tin;  Xofth  Central  dixision,  on  the  other 
hand,  the  attraction  is  maiiilw  if  we  exce[)t  Illinois, 
in  which  i-  Chicago,  and  *)hio.  l-i  ."State's  where  tlie 
iiiain    eniplo\'ment    i-^    in    iv^ficult  m'e    or    liunbering : 


222  The  Bargain  Theory  of  Wages. 

and  in  neither  case  do  the  nearest  States  to  the  Cana- 
dian centres  of  population  absorb  anything  like  the 
share  they  should,  if  the  law  of  migration  by  stages 
were  unconditionally  true.  Michigan,  it  is  true,  is 
immediately  contiguous  at  one  point  with  the  prov^- 
ince  of  Ontario;  but  30,466,  out  of  a  total  181,416 
Canadians,  ha\x'  travelled  across  the  breadth  of  On- 
tario from  Quebec  to  reach  the  lumber  woods  of 
Michigan.  The  fact,  however,  that  Ohio  absorbs 
more  than  three  times  as  many  Canadians  as  Indi- 
ana; that  Wisconsin  has  twice  as  many,  and  IMinne- 
sota  two  and  one  half  times  as  many  as  Iowa;  that 
North  Dakota  has  two  and  one  half  times  as  many 
as  South  Dakota,  and  as  many  as  Nebraska  and 
Kansas  taken  together:  while,  in  the  Western  divi- 
sion, in  s{)ite  of  equal  facilities  of  access  by  sea  from 
British  Columbia,  Washington  has  attracted  three 
times  as  many  as  Oregon,  which  lies  directly  to  the 
south  of  it,  seems  to  gi\'e  some  support  to  Mr. 
Ravenstein's  law. 

NORTH   ATLANTIC    DIVISION.  NORTH  CENTRAL  DIVISION. 

Maine 52,076  Ohio 16,575 

New  Hampshire 46,321  Indiana 4.954 

Vermont 25,004  Illinois 39.525 

Massachusetts 207,601  Michigan 1S1.416 

Rhode   Island 27,934  Wisconsin 33,163 

Connecticut 21,231  Minnesota 43,580 

New  "\'ork 93,i93  Iowa 17.465 

New  Jersey 4,6()3  Missouri S.525 

Pennsylvania 12,171  Noitii  Dakota 23,045 

South  Dakota '^493 

Total 490,229  Nebraska 12,105 

Kansas 1 1,874 

Total 401,660 


TcDiporary  Migration.  22; 


In  addition  to  the  nii_i;rati(jn  alrcad)-  discussed, 
there  is  a  kind  wliich  does  not  ai)i)ear  in  the  census 
tables;  because  the  mi_L;'i'ant  does  not  seek  a  chtnii- 
cile  in  the  district  int(j  which  he  niox'es.  llis  sojourn 
there  is  for  the  season  ;  and,  at  the  end  of  the  season, 
he  returns  t(.)  his  old  home.  This  kind  of  nii^rtition 
represents  the  niaxinunn  of  economic  mol)iHt\'.  The 
iiuH\'idual  sometimes  tr^u'els  \'ery  far  atield  in  searcli 
of  emploxMnent.  Some  trades  are  subject  to  periocH- 
cal  nn'^'rations  and  kd^or  circulates  free!)'  b(;tween 
different  parts  of  the  countr\'.  The  seasons  in  which 
trade  is  brisk  arc  sometimes  different  in  different 
I)arts  of  the  countr\-.  There  is,  for  instance,  a  cir- 
culation of  boot-  and  shoemakei's  between  London 
a!ul  pro\-incial  towns  such  ;is  Leicester  and  Xorwich  ; 
tlu're  beinL(,  at  the  same  time,  a  fairl\-  stead}'  mo\'e- 
ment  of  labor  in  \'aiaous  parts  of  I^n_<4iand  following; 
tin:  tran>f(.-r  of  industr}'  awa\-  from  the  sphere  of 
tratle-union  inHuence.  It  is  but  seklom,  however, 
that  the  seasonal  variations  of  intlustr\-  lead  to  con- 
siderable miL;"rati(^n.  except  in  the  case  of  a^niculture 
and  trades  dependent  on  the  seasons.  ddie  Irish 
har\-esters  who  come  in  large  numbers  across  the 
(dKinnel  to  meet  the  increased  demand  for  agi'icul- 
tural  labrir  at  h.arvest  time  ma\"  be  taken  as  a  t\'pical 
in-lance.  In  iSqO,  accordiiiL,''  to  the  annual  return 
of  the  I\ec^M-;tr.u"-General  f(^r  Ii'eland,  in  the  month 
of  June,  l4,oSi  pei'sons  left  their  homes  to  seek 
(.•mployment  as  ai^ricultural  laborei's  elsewhere.  Of 
tlie>e  siMsonal  mi_L(rants  S4.4  pe^r  cent.  souc;ht  work- 
in  I'Ln.L;lantl.   12.2  jjcr  cent,  in  Scotland,  and  4.4  per 


224  TJic  Bargain  Theory  of  Wages. 


cent,  in  Ireland,  mainly  in  Leinster,  in  the  counties 
around  Dublin.  The  migrants  form  a  fairly  large 
percentage  of  the  total  male  adult  population, 
amounting  in  County  Mayo  to  15.3  of  the  total 
adult  male  population  of  the  count}'.  The  same 
migratory  tendency  during  harvest  season  is  observ- 
able in  Germany,  where  there  is  a  movement  of 
agricultural  laborers  out  of,  and  into,  the  eastern 
provinces  of  the  kingdom  of  Prussia.  In  1892, 
96,894  laborers  left  the  four  eastern  provinces,  East 
Prussia,  West  Prussia,  Silesia,  and  Posen,  and  moved 
westward  in  search  of  work,  to  return  to  their  homes 
at  the  end  of  the  season  ;  while  in  the  same  year 
ncarl}'  twenty  thousand  immigrants  from  Russia  and 
Galicia  sought  temporary  emplo}-me!it  in  these  four 
provinces.  From  some  countries,  the  volume  of 
temporary  emigration  is  almost  as  large  as  the  vol- 
ume of  the  real  and  permanent.  In  1892,  from 
Italy,  107,025  emigrated  in  search  of  work,  for  the 
most  part,  in  the  spring  of  the  year,  to  various 
European  countries,  chiefly  to  P^rance,  Austria, 
Switzerland,  and  Gcrnian\'.  The  majority  of  the  mi- 
grants naturally  come  from  the  frontier  provinces, 
and  in  the  case  of  Udine  and  Bclluno,  more  than 
seven  per  cent,  of  the  wliole  population  seek  work 
in  other  European  countries  e\-er\-  \-car.'"  There  is  a 
similar  movement  across  the  Canadian  frontier  into 
the  United  States.  The  seasonal  industry  of  lum- 
bering, which  can   be  followed  in  the  winter  only, 

*  Mayo-Smith,    .Syr'/VZ/r.r  aju!    Scrio^'.y.   pp.  31 S,  330;     cf.  Bren- 
tam/s //('//rj,    U'a_^'c-s,  and  Prodiiitio)!,  pp.  41,  42. 


1\  -iiiporary  Mi  ignition . 


225 


causes  an  annual  migration  from  the  cultivated  por- 
tions of  the  ci)unti'\-  to  the  woods  and  in  tlie  spi'in^c,^ 
back  a^'ain.  When  the  lumberman  does  not  follow 
the  alternate  trades  of  farminL,^  and  lumberini';,  he 
has  his  summer  at  his  own  disposal.  Too  otten, 
thoui^h  not  s(»  oft^ai  as  in  former  years,  the  summer 
is  spent  in  loatlni;":  but,  ()f  late,  with  the  improved 
means  of  communication  and  increased  kno\\ledL,^c 
(^f  industi'ial  op[)ortunities,  there  has  spruni^  up  a 
habit  of  sojtJurninL,^  in  the  United  States  durini^  the 
summer,  where  em})lo\'ment  is  obtained  mainl}-  as 
brickla\"ers  and  bricklax'ers'  laborers.  The  seasons  fit 
into  each  other.  The  frost  and  snow  which  tlirow  the 
brickkiyei's  out  of  emi)lo\'ment  render  j^iossiblc  the 
work  in  the  woods.  It  is  perhaps  commoner  for  the 
summer  to  l.)e'  sj^ent  in  Canada  on  the  farni,  and  the 
winter  in  the  New  nni;Iand  mills  and  factories;  and 
a  L^re'.it  part  of  objection  raised  to  Canadian  labor  is 
tkie  to  this  practice  of  the  l*'rench  Canadian. 

The  Canadian  and  United  States  trade-unions 
make  Common  cause  a^^'ainst  the  trans-.vtlantic  mi- 
t;rant  who  crosses  to  work  in  Montreal  and  Xew  York 
durini,^  the  season  and  returns  for  the  winter  to  Scot- 
land and  England,  where,  in  the  mildei'  climate,  work 
cm  L;ene'rally  l)e  carried  on  throui^'hout  the  winter. 
Ma>on~;  and  bricklayers  are  said  to  be  the  chief 
olUaulers;  but,  in  spite  of  cheap  fare>  and  (piick 
transit,  the  compe'tition  of  such  migrants  cannot  be 
\-er\-  seriinis.  It  is  alle^^'ed  in  Canada  that  these  men 
conie  in  at  the  o])eninL;"  of  the  \-ear,  and  not  haxani; 
to  face  the  iT^ors  and  the  lack'  of  emj)loyment  cluir- 


226  TJie  Bargain  TJicory  of  Wages. 


acteristic  of  the  Canadian  winter,  can  afford  to  work 
for  lower  wages  than  the  Canadian  workman.  In 
Canada  work  is  scarce  in  winter,  and  generally  paid 
at  a  lower  rate;  and  in  many  trades  is  impossible. 
Consequently,  an  artisan  must  make  up  by  the  higher 
wages  in  the  summer  for  the  slack  times  and  higher 
cost  of  living  in  the  winter. 

It  is  hardly  necessary  to  take  advantage  of  human 
Aveakness  before  numbers  running  into  millions,  to 
ha\'e  the  importance  of  emigration  recognized.  With 
whatc\"er  deductions  the  figures  require  to  be  taken, 
on  account  of  the  impossibility  of  forming  an  esti- 
mate of  the  net  or  real  emigration,  there  is  no  deny- 
ing the  importance  of  the  movement  the\-  exhibit. 
Less  striking,  perhaps,  but  no  less  profound  in  its 
consetjuences,  and,  in  reality,  no  less  imposing  in  its 
silent  magnitude  than  the  barbarian  iiiwasions  which 
o\'erthrew  the  Roman  Enipire,  the  tide  of  emigra- 
tion has  set  steadily  from  the  old  world  to  the  new 
for  nearly  a  hundred  \-ears,  and  shows  no  signs  of 
diminishing  in  force.  Since  the  beginning  of  the 
centurv,  in  c\"er\-  year,  hundreds  of  thousands  of  the 
strength  and  manhood  of  e\"ery  State  in  Europe 
ha\"e  abjured  the  old  allegiance,  ha\'e  broken  the  old 
ties  and  the  old  associations  and  set  themselves  rcso- 
lutel\-  to  new  conditions  in  a  distant  part  of  the 
world.  Man}'  have  gone  amf)ng  strangers,  \\\\o  were 
yet  kinsfolk,  speaking  the  same  language  and  in- 
heriting the  same  political  traditions;  but  to  the 
great  mai'orit}-  emigration  has  meant  the  profound 
chancre  of  home  and   laniruaLre  aiid  customs.      The 


Loss  and  CJain. 


227 


results  of  this  niox'cincnt  arc  incalculable.  New 
continents  have  been  opened  up,  that  lai'i;cr  popula- 
tions nii^iit  be  supj)ortec_l  at  home;  new  markets 
have  been  c>tal)lislu-cl,  that  iiulustr)-  mi_L;ht  be  more 
economicall)-  C(.)iuluctecl ;  new  wealth  has  been  cre- 
att-d  ;  new  resources  developed;  new  nations  called 
inti  I  bciuL;. 

ri\e  nati(Ui>  of  the  old  \\-orld  ha\'e  _L;"i\<.n  of  their 
abundance  that  the  n.itions  of  the  new  miidit  be 
built  up;  but  we  cannot  estimate  the  [.neatness  or 
the  \'a]ue  of  tin-  j^ift  b\-  the  rouL;"h-and-read\-  method 
of  rci;'ai'din!4'  ex'ery  emiLjrant  as  an  irretrie\'able  lo.^s 
and  e\'ery  ImmiL^rant  as  a  L;"reat  gain.  The  popula- 
tion of  the  Ih'itish  Isles  wouUl  not  ha\'e  been  in  ex- 
cess of  fiftx"  millions  if  the  fifteen  milli(ms  who  have 
left  her  shores  had  remained  within  her  sea-girt 
borders.  It  would  ha\'e  l)een  no  larger  than  it  is  at 
present,  and  it  is  possible  it  might  ha\'e  been  a 
great  deal  less.  \\'hate\-er  may  be  the  case  un- 
der mt^re  ideal  conditions  of  land  tenure  (and  Dr. 
(ieffchen  ■•  shows  th.at  enn'gi-ation  from  the  vari(nis 
])ro\-inces  of  German\-  bears  a  distinctl\"  iiu'erse  rela- 
tictn  t(j  tlie  a\'erage  si/e  of  the  h(ddingi,  at  present 
the  British  Isles  coultl  not  ])roduce  food  for  thirt)'- 
eight  millions  without  serious  economic  loss  a'.ul  in- 
du<ti'iaUlerangement.      A  much  larger  pri  >;)ortioti  of 

*  Sk-li'-n'iirr^''^  I [ nuii'ii^  ■; ,  ii.,  Auf.  iii.,  y.  i'i''3.  1 'ic  I'r-.v.iicii 
licL^''!!  iriK  ill  il.i-  lvrtiM;^>f;iliiL,kt-'ii  ili.>  r.ixlcn^,  iinth  iiulir  iiIht  in 
i!c-.\  \ <:v\v:\\v.\\-^\  nstiirLii-.-<,-n  i-!  'liirrh-flir.iulicli  inMit  -clir  fnulit- 
In'.r  i!!-'  li.il  'l..  li  v.eiiiL:  Au-waii'li  riiiiL,.  McclilfiilniiL;  i-!  fnuliil'ar 
uiiii  lo.i  ^t.'.i  ki  A'.isw  aiuicruiiL;.  i:;  ■..■i"-'''rt.ni  i>t  iiichr  i  liHlciivtrtL-iluiii,', 
in  It;!, 'lu''. 11  hrii-c'i.-n  die  I  .aiifiiiiiHcn. 


228  The  Bargain  TJicory  of  Wages. 


the  population  would  require  to  devote  itself  to  the 
production  of  food,  and  England's  economic  position 
as  an  industrial  and  manufacturing  nation  could  not 
be  maintained.  Her  extreme  industrial  speciaHza- 
tion  has  been  possible  because  the  opening  up  and 
settling  of  virgin  continents  have  given  her  a  cheaper 
supply  of  food  than  she  could  have  obtained  from 
her  own  soil;  and  have,  at  the  same  time,  widened 
the  market  for  the  products  of  her  mills  and  fac- 
tories. The  area  of  the  world's  market  has  been 
extended  by  the  movement ;  and  producti\'e  capacity 
has  been  increased  to  a  proportional  extent.  The 
emigrants  departed  only  to  make  room  for  a  corre- 
sponding number  of  workers.  As  we  saw  in  Chapter 
v.,  a  large  number  of  the  emigrants  have  risen  at 
least  nominally  in  the  ranks  of  labor;  and,  so  far  as 
tliis  rise  from  the  ranks  of  the  u.nskilled  has  been 
real,  there  has  been  a  great  gain  to  tlie  productive 
capabilities  of  tlie  world.  The  great  \-olum(j  of  emi- 
gration has  j)ermitted  a  more  economical  use  of  the 
\\-orld"s  resources;  and  to  this  exten-t  emigration  has 
been  fruitful  of  gain.  It  cann()t  be  said  that  the 
gain  has  been  distributed  in  proportion  to  the  con- 
tributions made.  The  emigrants  themseh'cs  in  the 
new  countr)-  ha\"c  natural!)-  engrossed  a  greater  part 
of  it;  but  what  of  gain  there  has  been  for  the  coun- 
tries of  origin  has  !iot  Ix-en  di-tributed  according 
to  th.c  contributions  made  to  the  \-oIume  of  emi- 
gration. Nations  ha\-e  sliared  in  it  which  have 
coiitributed  nothing.  l"he  trade  of  k^-ance  with 
the  United    States  has  Lfrown    during   the  last  sev- 


Aleasiiri-  of  Loss  caul  (lain. 


229 


cnty  years  as  stcadil}-  as  the  trade  of  Germany: 
)-et  France  has  sent  none  of  her  chihlren  be\-ontl 
tlie  seas,  while  Cierniaiu'  has  _L;'iv'en  mure  than  six 
millions.  The  ex[)orts  of  the  United  lvinL;"dom  t(j 
the  United  States  ha\'e  risen  from  rather  less  than 
four  millions  sterling;-  in  iSjo  to  more  th-ui  thirL\'- 
two  millions  in  !  Sijo ;  and  the  increase  does  not 
seem  to  he  as  i^reat  as  mi;^ht  he  expectetl  in  return 
for  a  contribution  of  eiy;ht  or  nine  millions  of  people  ; 
e>})eciall)-,  when  we  remember  that  tlie  total  ])riti>h 
export  tr.ide  lias  increased,  in  the  same  period,  in 
almost  the  same  ratio,  from  thirty-six  millions  to 
two  hundred  and  sixt\'-three.  We  cannot  say  how 
gTeat  an  increased  resultant  of  trade  we  mii^ht  ha\'e 
looked  for;  aaul,  conse([uentl\',  we  ha\'e  no  me;ins 
of  measurini;  absolutel)-  the  loss  and  i^'a^in  b\-  emi^n'a- 
tion.  h^-ance  has  u!idoubtedl\-  !j;ained  because  she 
has  in  the  be<_;innintj;  lost  little,  and  her  _L,'^ains  are 
therefore  iu;t  ^ains.  German}'  lias  lost  as  much 
as  an\-  nati(Mi  l)ecause  all  her  citizens  ha\'e  e'mi;4rated 
to  foreiiMi  countries.  Th.e  I'rdtCv!  Kingdom  li;i:-,  not 
lost  so  much  projjortionally ;  because,  thouL;"h  ihe 
s^n'eat  majiU'ity  of  her  emie;rants  ha\"e  ;;"one  to  coun- 
tries inde[)entlent  of  their  natix'e  land,  a  ci.,'rtaiii  pro- 
P'M'tion  ha\-e  settletl  in  llu'  Ih'ilish  coloirii.'S  arid  harcc 
maintained  closer  ties,  wiih  the  moth.er  countr\-  tham 
ha\-e  tho-^e  who  settled  in.  the  IbiiU'd  State-.  Tliis 
t^ix'cs  us  one  rclati\'e  meaais  of  e;-Liniat  in;j,"  the  loss 
and  i:^ain  of  emiL4"i'ation.  ICach  c-'ioni-t  buae-  hh'itish 
pi-oeluce  to  the  amount  of  one  hundred  and  sixt\-- 
eieiit   >hi!lin'. -,    while   the    eriii''r.uit   to    the    UnitLi-l 


230  The  Bargain  Tlicory  of  IVages 


States  buys  only  forty-seven  shillings'  worth — a 
difference  of  one  hundred  and  twenty-one  shillings 
per  head.  We  need  not  attempt  to  determine  how 
far  trade  follows  the  flag;  but  it  is  obvious  that  if 
the  eight  or  nine  millions  who  have  left  the  British 
Isles  for  the  United  States  had  gone  to  the  British 
colonies,  British  export  trade  would  have  been  larger 
by  thirty  or  forty  millions  per  annum,  or,  making 
allowance  for  an  earlier  and  completer  industrial  de- 
velopment of  the  colonies  consequent  upon  the  larger 
emigration,  by  at  least  twenty  millions.  Even  to 
the  colonies  Englishmen  go  out,  as  the  Corcyrans 
did  of  old,  "  on  a  footing  of  equality  with,  not  of 
slavery  to,  those  that  remained  behind,"  and  since 
the  colonial  trade  was  freed  from  all  preferences  to 
English  goods,  we  have  no  guarantee  that,  as  colo- 
nists, they  buy  all  that  a  corresponding  number  at 
home  would  have  bought.  It  is  only  a  relative 
means  of  estimating  the  loss  by  emigration.  J.  S. 
Mill  declares  that  "  there  needs  be  no  hesitation  in 
affirming  that  colonization,  in  the  present  state  of 
the  world,  is  the  best  affair  of  business  in  which  the 
capital  of  an  old  and  wealthy  country  can  engage  "  ^  ; 
but  the  main  result  of  emigration,  at  any  rate,  for 
most  European  nations  seems  to  be  the  creation  and 
fostering  of  industrial  and  commercial  rivals.  Ger- 
many has  all  along  suffered  more  or  less  from  the 
competition  of  the  United  States  as  a  food  producer 
and  as  a  competitor  for  the  English  market.  Eng- 
lish agriculturrd  interests  have  likewise  suffered ; 
and  we  sjcm  to  be  at  the  beginning  of  a  pci'iod  of 

*  Principles  of  Political  I-'.cJiuvny  {\)OY).  ed.),  p.  586. 


The  Gain  to  flic  Rccrk'ijig  Coioitry 


2X\ 


iiKliistrial  conipctilion  I)cI\vcl'ii  I'Lnj^lancl  and  the 
United  States.  i\s  Adam  Smith  sa\-s,  in  another 
connection,    "  the    inconx'eniences  "    of    emii^ration 

e\'ery  c<)untr\'  has  enL;rossetl  to  itseU  completel}'. 
The  atl\-anta_L;es  ...  it  has  been  obliL;"ed  to 
share  with  man\-  otlier  countries."  "■ 

On  the  other  liaiid  the  addition  to  the  jiopuhition 
in  the  i'eci:i\'in;_;'  comUries  cannot  be  rec^arded  as  pure 
_L;",iin.  The  popuhition  of  tlie  United  States  lias 
chirini;'  the  enii^iMtii  mi  period  been  auc;mented  b\- 
fifteen  mihions  of  iminii^M'ants  ;  but  the  rate  of  in- 
crease of  the  popuhitioii  lias  remained  stationary 
ckirini^  the  [)eriod  or  actually  fallen.  It  may  seem 
too  much  to  sa\-  that  the  po[iulation  of  the  United 
States  would  ha\'e  been  ;is  lar^^e  as,  or  Iar;^fer  than, 
it  is  to-day.  had  there  been  no  immii^ration  ;  but  it 
is  undoubtedh'  true  that  immiL^ration  has  checked 
what  would  otherwise  ha\'e  been  the  natural  rate  of 
increase.  The  fact  is  clearly  brouL;ht  out  in  the 
followinu'  table  : 


r 

I'KKCENT.V 

;f.  nF  !• 

XI 

K.\SK  IN 

\'  E  A  K . 

1 

I' 
IN 

DECAlJb;. 

IM-.IICKA- 

I  li  IN    IN 
DliCALlIC. 

il'^ADI- 

1 

1 
I  7,0'.), 45 3 

?■•'),  I  25 

Totil.       1 
32.67 

ly  In- HI 
Kr;it;"r.. 

-' 

Natural. 

1S40 

4 

203,433 

4.'-/, 

2-!. or 

I-;^:  i 

23,  iiii,-7() 

h 

122,423 

1 

.713.251 

35.-7 

i.'.o4 

2?.  S3 

I-(H) 

31,4  13, 321 

.- 

-51.4;? 

2 

=  7'i,5-'  1 

3  5  .  _::  ^ 

I  I .  I  -■ 

24.40 

IS7') 

3,  -.;;--,  3  7  I 

7 

1 1 5,"f " 

2 

2 7-. 42; 

2  2, '.3 

7  ■  -  - 

T  5 . 3  .S 

l--:^') 

51),  I  5;,7-  ; 

I  I 

-')7. 41- 

2 

Si  2.  i()i 

3(1.,  ,.^ 

7  -  0 

22.71) 

\-'p 

''2. ''22. 2  =  1  ■ 
1        ' 

12 

M"'.4''7 

^ 

24(.,'.i3 

24.-0 

10. 4f' 

14.40 

*  Wealth  cf  Xa'.icHs  (  Nicli^  4- m's  ol.i,  ji.  260. 


232  TJic  Bargain  Theory  of  Wages. 


Moreover,  the  countries  of  Europe  have  not  always 
completed  their  contributions.  They  ma\'  give  the 
labor;  but  without  the  opportunities  for  employing 
the  labor  the  gift  ma}'  be  a  burden;  and  the  oppor- 
tunities are  limited  by  the  wealth  and  capital  of  the 
country.  In  the  United  States,  in  1890,  the  average 
amount  of  wealth  per  inhabitant  exceeded  one  thou- 
sand dollars ;  and  the  average  amount  of  wealth 
brought  in  by  the  immigrant  certainly  does  not 
amount  to  one  hundred  dollars.  We  may  not  ac- 
cept in  its  full  extent  the  proposition  that  indus- 
try is  limited  by  capital;  and  }-et  we  must  admit 
that  in  modern  industry  capital  is  indispensable.  In 
1890  the  capital  inxxsted  in  the  United  States  in 
meclianical  and  nianufacturing  industries  alone 
amounted  to  $6,525,156,486,  or  rather  more  than 
one  hundred  dollars  per  head  of  the  population,  or 
$1384  per  empl()yee.  To  the  fund  of  capital  the 
immigr.mt  can  add  little  or  nothing;  and,  conse- 
qucntl\',  to  the  degree  in  which  the  Wages-Fund 
Theoi'}-  is  true,  inmiigration  may  prove  a  hardship  to 
the  recei\'ing  nation. 

These,  ho\\'ever,  arc  only  general  considerations 
wliich  might  help  us  to  decide  \\-hether  emigration 
and  immigration  is  a  Inss  or  gain  ;  but  tliey  afford 
no  means  of  estimating  how  mucli  the  gain  or  the 
loss  actually  is.  \"arious  methods  ■■•  ha\-e  been  em- 
ploved  to  obtain  an  approximate  measure  of  the 
amount.      The  one  generally  employed   consists  in 

*  For  a  full  discubsion  of  these  methods  see  Mayo-Smith,  Evdi^ra- 
lion,  c,  6, 


The  Ciiiin  }iot  to  be  Accurately  .Measured.       233 


forming-  some  roii;.;!)  estimate  of  the  cost  of  rearing 
aiul  trainini;' a  child  till  he  arri\es  at  industrial  }-ears, 
and  then  t.d^inL;"  this  amount  as  the  measure  of  the 
h)ss  to  the  counti'}'  of  orii^in  and  the  L;ain  to  the 
countr)'  which  receix'es  him.  To  this  amount  is 
i:;"enei'ally  ailded  the  a\'<M'a',;"e  amount  of  moiiey  in 
the  sh.ipe  of  L^old  oi'  drafts  which  the  immi;^''rant 
l)rin_i;s  with  him.  .Vnother  and  more  elaborate 
method  estimati.:s  the  laborer's  chances  of  life, 
acordiuL^f  to  the  accepted  standards,  and  then,  after 
deductin<j,'  from  his  total  eai'iiiiv^'s,  durini:;  the  period 
he  has  still  to  li\-e,  the  cost  of  maintaininL,^  him 
durin.L^  that  period,  regards  the  surplus  as  the  loss 
b\-  each  emigrant  and  the  gain  b\'  each  immigrant. 
These  calculations  and  results  are  exceedingl}'  inter- 
esting, antl  throw  some  light  on  the  (juestion  of  the 
balance  of  trade  l)etween  nations,  but  tlo  not  g<^  far 
to  gi\'e  us  an  accunite  measure  of  loss  and  gain  1)\- 
emigr.ition  and  immigration.  l"he\'  ei"r  in  attempt- 
ing to  measure  accurate!}'  what  cannot  be  accurately 
UR-asui'edi ;  and  ai"e  als(_)  open  to  the  serimis  objection 
that  tlie\-  suppo>e  labor  to  ha\'e  some  defmite  prc- 
determineel  \'alue  ;u)art  fi'< mi  the  o])])(^rtunities  it  may 
I)e  atforded  of  creating  \\\:alth.  That  it  is  a  loss  to  a 
nation,  howewr,  to  ti'ain  up  its  childi'en  to  manhood 
and  then  ha\-e  to  begin,  the  process  anew,  when  the 
sti\'ngth  and  manliood  of  the  nation  seelx  a  career 
in  a  fi)!\ig!i  I:;nd,  i^  a  f;ict  wliicli  caiin.ot  1)l'  di-puted. 
'Idle  WMi'Id.  as  a  whole,  ma)-  l)e  a  gainei'  b\-  the  pro- 
cess. Iiut  t(i  the  indi\'idual  countr\-  of  oi'igin  the  pro- 
cess is  not  onl\-  a  loss,  but  a  di^heaiteninu"  loss.      The 


234  TJic  Bargain  Tlicoi-y  of  Wages. 


majority  of  the  emigrants,"'^  more  than  sixty  percent, 
of  them,  are  adult  males  in  the  prime  of  their  physi- 
cal strength,  and  the  drain  is  on  the  effective  indus- 
trial population  of  a  r.ation. 

The  grand  totals  of  emigration  and  immigration 
have  led  many  to  adopt,  somewhat  unnecessarily, 
an  alarmist  tone.  There  is  no  country  in  danger  of 
being  depopulated  on  account  of  emigration  and  no 
country  where  the  quantity  rather  than  the  quality 
affords  real  cause  for  alarm.  Here  and  there  there 
may  be  districts  from  which  immigration  has  taken 
aAvay  all  the  energy  and  left  nothing  but  stagnation 
and  depression  behind.  In  the  ^Maritime  provinces 
of  Canada  there  arc  districts  \\-hich  have  suffered 
very  severely,  more  se\-erely  than  the  aggregates  of 
the  census  reports  at  first  indicate;  but  there,  as 
elsewhere,  over  a  large  area,  emigration  can  do  little 
more  than  keep  the  population  stationary  and  seldom 
carries  out  anything  like  the  natural  excess  of  births 
o\'er  deaths.  As  the  \'olume  of  immigration  is  seldom 
distributed  equally  o\-er  the  whole  area  of  the  receiv- 
ing country,  so  it  is  rarely  ever  drawn  in  equal  pro- 
portions from  the  districts  of  the  country  of  origin. 
Particular  districts  may  exj^erience  an  actual  decrease 
in  population,  but,  as  the  following  table,  taken 
partly  from  Schonberg's  Haiuiluicli.  and  partly  from 
Mayo-Smith's  Statistics  a)id  Sociology,  shows,  there 
is  little  danger  of  a  country  being  dejDopulated  : 

*  See  Fawcett's  Political  Economy,  p.  602  (sixtli  ed). 


Natural  Increase  of  Population. 


!35 


COUNTRY. 


i:.\CF.-^'<  III"   liiRTiis  (i\Kii     ;:Mii-,R.\riuN    I'KK    kk>i  in- 

lHvAIHs    I'l-K     HO)  llAl;ri.\Nls     l"    ■  "IN  ]  KIh> 

INIIAIU  lANlS.  cirislDli    KIKCJI'K. 


L'liitcil  I\in;;ili>in '  12.3 

( icrr.i.iiiy '  i  1 .  3 

Italy ,  I  I  .5 

I'laiuc j  2.3 

^w  it/crlaml 1  6.4 

>\st'K-n 1 1  .  S 

.\''>r\\  ay 14-9 

I  )cninark 1  1 1  .  7 


1S35. 


1 1 ,  <) 

10 

-4 

5-7 

7 

:; 

^ 

51 

I  2  .  ( ) 

'7 

2 . 2 

2 

0 

2 

23 

(,.8 

10 

14 

2 . 7 

6 

0 

3 

53 

I  .  I 

0 

0.  I 

0 

(, 

0 

14 

■"  _  > 

S 

2 . 3 

2 

■- 

2 

(,4 

9 

4.U 

9 

7 

fi 

^7 

1 1 .  s 

1 1 

7  •  - 

1 1 

2 

^ 

S3 

13.4 

10 

2. 1 

4 

0 

4 

1^> 

l"'roni  this  tabic  it  is  apparent  that  eniii^ration  is 
_<4;rcatcst  in  ])r(^porti()n  from  those  countries  where 
the  natural  excess  of  births  o\"cr  deaths  is  hii;]iest, 
and  where  the  popuhition  increases  but  slowh',  the 
\-()lunie  of  emiL^ration  is  least,  l-'rom  hh'ance,  from 
which  there  is  practical!)-  no  emii^'ration,  the  excess 
of  birtlis  o\-ei-  deaths  is  barely  sufficient  to  keep  the 
population  stati(^nar\-.  The  Maritime  provinc(;s  of 
I'anada  presc-nt  the  somewhat  unusual  phencunenon 
of  a  lai';^"e  excess  of  births  o\'er  deaths  and  a  station- 
ary iio])ulation  ;  and  the  ]:»henf>menon  is  accounted 
for  b\-  emi;j,'ration  to  the  United  States.  Unfortu- 
nately, no  sy-stematic  records  of  the  mo\'ements  of 
[)opuLition  are  kept;  and,  since  1SS5,  the  United 
States  has  civased  e\'en  to  ])retL'nd  t()  k-i:ep  account 
of  the  imnii;.n-atinii  from  Iha'ti-h  Xoilh  Anu'rica.  \n 
the  census  yxMr  iSijl  the  excess  of  birth-;  o\-ei'  d-.-aths 
was  for  Xcw  ISrun-^w  iclc,  14.34  jK'r  thmb^and;  for 
I'rince  I'xlward.  13.  19  per  thousand  ;  \or  Xova  Scotia, 


236  The  Bargain  Theory  of  Usages. 


10.84  per  thousand.  This  large  excess  is  removed 
by  emigration;  for  the  population  of  Nova  Scotia 
increased  in  the  decade  1881-91  only  2.23  percent.  ; 
Prince  Edward  Island  increased  .17;  and  the  popu- 
lation of  New  Brunswick  has  remained  absolutely 
stationary. 

The  forces  which  have  led  to  emigration  have 
changed  from  generation  to  generation ;  but  the 
only  really  efficient  cause  has  been  the  economic. 
It  is  true  that  the  economic  motive  began  to  operate 
onh'  from  the  beginning  of  the  present  century. 
Early  emigration  was  due  to  political  or  religious 
causes;  but  the  volume  of  emigration  never  swelled 
to  any  dimensions  till  the  economic  motive  began 
to  oj)erate. 

In  1 75 1,  when  the  population  of  the  American 
colonies,  according  to  Bancroft,  was  more  than 
cle\'en  hundred  thousand,  Benjamin  Franklin  '"  esti- 
mated that  the  number  of  emigrants  from  whom 
this  population  was  descended,  did  not  amcnmt  to 
more  than  eighty  thousand,  of  whom  t\\'enty  thou- 
sand had  arrived  before  1640.  Practically,  we  may 
sa}-,  that  emigration  from  Europe  did  not  begin  till 
after  the  downfall  of  Napoleon  had  released  Europe 
from  the  fears  of  immediate  war  and  pei'mittcd  the 
go\-ernments  of  Eurc^pe  to  slacken  their  hold  upon 
their  subjects,  h^rnm  1S20,  the  mo\'ement  of  the 
nations  begins.  Men  sought  no  longer  an  Eldorado 
where  even  the  poorest  might  grow  rich  without 
effort,  or  a  retreat  where  they  might  worship  God 

*   /r<v/'T,  vol.  ii.,  p.  319. 


Emigration  an  Economic  ]\Iovc))icnt.  237 


according;'  to  the  dictates  of  conscience;  but  a  land 
of  opportunit}'.  The  pe)htical  motive  has  not  been 
entirely  absent  tlurini;  the  pres  'nt  century,  though 
it  has  usually  been  an  economic  motix'e  under  a 
political  Louise.  The  excessive  drain  from  Italy 
during;'  the  last  decade  is  unmistakabl\-  due  to  the 
tremendous  and  increasinj.,^  burden  of  taxation.  The 
desire  to  esca;)e  the  blood  tax  of  compulsor\-  military 
ser\ice  has  swelled  the  volume  of  emi;4ration  from 
(xcrmany.  K\-en  in  1872  and  1873,  when  the  con- 
ditions of  the  laborini;'  classes  were  "  fast  uni^esund 
i;unstii;"e,"  ■'•  more  than  ten  thousand  injuncti(jns 
were,  each  year,  takeii  out  against  intending  emi- 
grants on  the  ground  that  the\-  liad  not  ser\-ed  in 
the  army;  and  as  the  burtlens  of  militarism  are  in- 
creased, and  grounds  in  merc\'  for  exemption  arc  re- 
stricted, larger  numl)ers  will  annually  seek  to  escape 
from  the  burden  which  alread}'  presses  with  crush- 
ing weight  upon  the  manhood  of  Europe.  The 
desire  to  escape  from  the  burden  of  taxation  is, 
howc\'er,  onl\'  an  eCMiu)mic  moti\'e  slighth'  disguised. 
Pure  })olitical  moti\'es  opei'ate  rather  to  re-trict  than 
to  increase  the  volume,  although  the  hereditar\'  hate 
of  the  Irish  for  England  still  sustains  a  ni()\-emeiit 
of  which  bad  agr.uaan  conditions  have  been  the  chief 
cause. 

When  we  examine  the  statistics  of  emigration  and 
immigration  we  disco\-er  that  there  ha\'e  lieen  c}'cles 
in  the  mox'ement  which  corresp<uid  in  a  cert.iin 
me.isure  with  the  c\'cles  in  industry  and   commerce, 

*  >chi)iil)(.TL;'s  I/,inJn<,h,  ii.,  \<.   1063. 


238  TJic  Bargain  Theory  of  ]Vages. 


The  fluctuation  in  the  volume  of  emigration  is  obvi- 
ously an  effect  of  the  variations  of  industry ;  but  the 
way  in  which  the  state  of  industry  reacts  on  the 
volume  of  emigration  is  not  very  clear.  There  has 
been  a  good  deal  of  discussion  on  the  point  whether 
emigration  increases  because  of  good  times  or  of 
bad  times.  It  is  argued,  on  the  one  hand,  though 
somewhat  a  priori,  that  the  volume  of  emigration 
will  be  largest  when  industry  is  in  the  most  flourish- 
ing condition,  because  onh'  at  such  times  are  the 
working  classes  able  to  meet  the  necessary  expenses. 
Prince  Bismarck  argued,  in  the  Reichstag,  on  June 
8,  1885,  that  emigration  increased  during  periods  of 
prosperit}-,  and  e\-en  went  so  far  as  to  take  the  posi- 
tion, from  which  he  afterwards  receded  somewhat, 
that  it  was  the  only  cause  of  the  increase.  Emigra- 
tion, however,  as  Dr.  Geffchen  ^  argues  conclusively 
to  the  contrar}',  is  not  greatest  from  the  most  pros- 
perous districts  of  Germany,  but  from  the  least  pros- 
perous. On  the  other  hand,  it  is  argued  equally  a 
priori  that  rncn  lea\-e  their  nati\-e  country  only 
under  pressure  of  bad  times.  But  those  ^\"ho  are 
out  of  work  ha\'e  not  the  means;  and,  as  a  rule, 
those  who  ha\'e  the  means  are  not  in  a  mood  to 
make  so  great  an  experiment.  The  following  com- 
paratix'c  table  of  out-()f-work  and  emigration  statis- 
tics shows  ^\■hat  relation  has  actualh-  held  in  hlngland 
between  emigration  and  the  state  of  trade.  The 
out-of-work  returns  are  taken  from  Mr.  Burnett's 
Board  of  Trade  Report. 

*  Schonljerg's  IlanJbuch,  ii.,  p.  ro6o. 


TJic  Causes  of  H})iigration. 


'■39 


PKRCKNTAi;!', 
YEAR.  OUT  i)l' 

\V(iKK. 
iSSC)     KM        .  .  . 

18S7  S.(.   .  .  . 

isSS  4.4   .  .  . 


iSnO 

IS.)I 

1 89;, 

iS.^4 
1S95 


l.S 
2.6 


Ni: r  i.mii;raito\  ay 

lUUlISlI  AM)  iiusir 

sri;ji.(i.s. 


I5_',-^S2 

I-)'', 012 

i-'5.7'J5 
'  5'  '.7-5 


4-15    

7-33     

!■')      

7-"      37,7-1 

5-s      75. 7*^)3 


H5.47'J 
112,262 

iu6,6,;5 


rF.KCF,NTAC;i;  OF 

KM  I  (;  RATI  OX 
10   I'Ol'ULATION. 


(J. 41 
0.53 
0.50 
0.40 


1(^^,646    0.29 


0.30 
V.  2i) 
0.27 
0.09 
0.19 


These  fiLiuros  prr)\'c  notliiiio-  von-  conclusixx'ly  rc- 
oaiiliii^-  the  cause  of  einioratioii.  The  \'()huiie  of 
enii_L;"ration  is  practically  ecjual  in  the  best  \'ear  and 
the  worst  year,  in  iSScjand  in  18S6.  The  \-olume 
of  emigration  is  i;-reatest  when  the  state  of  trade  is 
neither  \'ery  j^ood  nor  very  bad.  The  period  taken 
for  Comparison  is  too  short  to  justit}'  any  sweepin^^ 
conclusion.  If  an\-  conclusion  at  all  is  justified,  it 
is  that  the  years  of  re\'i\-inL^  trade  after  a  period  of 
de))ression  are  mai'ked  by  an  increase  of  emis^ration. 
The  memories  of  bad  times  ha\"e  not  yet  faded,  and 
the  first  use  man\-  seem  to  make  of  more  reoular 
work  and  hi^'her  wa_L;"es  is  to  scrape  together  enougii 
t<  >  lea\-e  the  criuntry. 

When  we  turn  to  the  figures  of  immii^^n'ation  into 
the  Ignited  States,  we  find  tliat  the  \'(tlume  of  niii^ra- 
tion  has  tluctuated  to  a  \-er\'  lai'^e  extent,  and  tliat 
it  has  perfectly  defim'te  Diaxiiiia  ami  juiin'nia  which 
cori'e-^jxMid  with  the  course  of  trade  and  industr\-. 
When  we  lnok  closeh'  into  the  fiuct nations,  we  see 
them   coincide  \'er\-  nearl\-  with   the  chanLTcs  in  the 


240  TJic  Bargain  Theory  of  Wages. 


prosperity  of  the  country  which  receives  the  immi- 
grant :  tlic  concomitant  variation  proves  that  the 
connection  between  immigration  and  prosperity  is 
very  close,  but  whether  the  connection  is  of  cause  or 
of  effect  or  of  mutual  determination  does  not  clearly 
appear.  I  have  compared  in  the  following  diagram 
the  fluctuations  in  trade  and  in  immigration,  and  with 
that  purpose  have  selected  as  the  best  index  of  the 
rclati\-e  prosperity  of  a  new  countr}-  like  the  United 
States  the  number  of  new  miles  of  railroad  opened 
each  }'car  since  1845.  This  is  only  one  indication 
out  of  many,  and  might  easily  be  sup|)lementcd  by 
others,  such  as  the  earnings  of  the  railroads,  the 
bankruptcies  in  each  \'car,  the  total  exports  and  im- 
ports, the  exports  and  imports  of  bullion  ;  but  the 
index  selected  is  perhaps  as  clear  as  any  other,  and, 
in  the  case  of  the  United  States,  which  down  to  the 
last  decade  was  still  in  process  of  expansion,  is  prob- 
abl\'  better  adapted  to  show  the  fluctuations  which 
ha\-e  taken  place  in  the  busisiess  of  the  community. 
Wliilc  there  arc  still  large  areas  to  be  opened  up, 
ad\'ancing  prosperity  will  alwa\'s  be  marked  by 
schemes  for  new  railway's  :  wlien  trade  is  depressed 
and  new  enterprises  are  avoided  fewer  miles  will  be 
constructed.  In  the  diagram  the  number  of  immi- 
grants is  sho\\"n  in  the  left  margin  in  thousands  (fifty 
tliousand  U)  the  half-inch);  and  the  number  of  new 
miles  of  railroad  constructed  each  year  is  shown  in 
the  right  margin  (one  thousand  to  the  half-inch). 
An  examination  of  the  diagram  will  gi\"e  a  clearer 
idea   of   the   correspondence   than    many    tables    of 


TJie  I^iiV'TiDn. 


241 


figures.  I'lu;  coinparisoii  h.is  (nily  been  carried  back- 
to  1845,  on  accouiil  of  the  necessities  of  the  scale 
antl  of  clearness.  Tlie  ciiac;r,ini  also  exhibits  an 
analysis  ot  the  main  curve  of  innni^ration  \\\1o  its 
chief  constituent  elements,  the  (icrman  and  the 
l>ritish,  which  latter  a;4ain  is  anal\-/.ed  in  the  curvx^ 
of  Irish  immigration.  The  intention  at  first  was  to 
trace  (mi  the  same  diagr.im  the  fluctuations  of  Ger- 
man and  Hritish  trade  and  industr\';  but  the  remark- 
able and  une.\4)ected  closeness  of  the  ciM'respondence 
between  the  prosperit}'  of  the  United  States  and  the 
volume  of  immigration  has  rendered  this  unneces- 
sary. The  maxi)iia  and  miiiiiiia  oi  the  two  curves 
practicalh'  coincide.  The  onl\-  variation  of  any  im- 
portance occurred  between  1845  and  1850,  when  the 
\'olume  of  imnu'gration  was  large  from  the  effect  of 
the  Irish  famine.  There  arc  two  explanations  of 
this  remarkable  concomitant  \',ii'iation — one  that  the 
immigration  i-.  the  cause  of  the  expansion  of  trade 
and  industry,  the  other  that  it  is  the  effect  of  such 
t'xpansion.  The  foirnei'  is  not  often  put  forward  as 
an  explanation,  ,ind  in  this  instance  ma\-  be  set  aside. 
!)ecause  the  uiiixinia  and  miinn.'i^  of  trade  and  in- 
dustry as  indicated  by  the  raili'oad  ex])ansio!i  (Kcur 
one  or  two  yoai's  eai'lier  than  the  coiTcsi)on(ling 
mnxiniii  and  iniiiini:!  of  immigi'ation.  The  incrL'.ise 
or  decrease  iu  the  amount  ot  immigr.ilion  is  thus 
gowM'ned  by  the  state  of  trade  in  the  rnitv.'d  Statt^'S. 
Mi-.  Idcwclb/n  Smitli  uses  :\  pliras"  to  (K'~,eribe  tlu,' 
cau->e  of  mi'M'ation  from  the  pro\-inces  to  London 
which    we    may    .ulopt    a->    an     t:.\planation    of    the 


242  TIic  Bargain  Theory  of  Wages. 


amount  of  immigration.  It  is,  he  says,  due  not  to 
pressure  from  without  but  to  suction  from  within. 
The  expansion  of  trade  and  industry  creates  a  de- 
mand for  labor  (and  for  labor  of  such  a  kind)  as  can 
best  be  supplied  from  the  outside.  Immigrants  come 
in  response  to  the  invitation  of  industry  and  come 
to  do  work,  as  we  shall  see  later,  which  the  native 
American  is  unwilling  to  do.  The  state  of  the 
country  of  origin  has  little  to  do  with  determining 
the  volume  of  emigration.  Commercial  depressions 
are  experienced  at  the  same  time  in  the  United  King- 
dom and  in  America,  and  emigration  offers  small 
chance  of  escape.  F'rom  Italy  and  the  southern 
countries  of  Europe  the  volume  of  emigration  is 
almost  entirely  determined  by  the  state  of  trade  in 
the  United  States.  A  large  proportion  of  these 
immigrants  are  assisted  by  remittances  from  the 
friends  who  have  preceded  them  to  America;  and 
the  amount  of  such  remittances  naturally  decreases 
v.'hen  trade  is  bad  in  America.  Germany  occupies 
the  middle  position.  It  is  not  so  readily  subject  to 
commercial  depressions  and  on  the  other  hand 
German  emigrants  are  not  so  dependent  as  Italians 
on  remittances  from  America.  We  should  expect, 
therefore,  that  the  variations  in  the  volume  of  Ger- 
man emigration  would  correspond  less  closely  with 
the  changes  in  industry  in  the  United  States;  and 
this  result  is  discernible.  There  was  a  large  increase 
after  1853  in  consequence  of  the  bad  times  and 
scarcity  in  Germany ;  but  since  then  the  two  curves 
have  moved  toi^ether. 


TJic  Industrial  Quality  of  the  liini^i^raiits. 


The  C()ni[)arali\c  table  of  exeess  (;f  uiiths  ox'er 
(leatlis  and  of  enn\L;ratioii  on  pai^e  235,  disposed  of 
the  ahirniist  ielea  that  continued  eniii^ration  would 
result  in  dej)opulation.  'I'he  fear  that  the  industrial 
capacity  of  a  nation  nia\'  be  fata!l\-  weakened  will 
also  i;i\"e  way  if  we  consider  the  industrial  character 
of  the  eniii^i-ants.  No  nation  is  reall\-  L,d\-inL^  of  its 
best.  It  !j,"i\-es  at  the  most  only  a  certain  proportion 
of  its  unskilletl  labor  and  sends  out  but  few  of  its 
artisans  and  factory  hands  to  carr\'  to  new  laiids  the 
secrets  of  traditional  skill.  In  1S91,  accordini^  to 
the  L;'ross  estimate,  189,756  adults  of  Ih'itish  ori^jin  of 
whom  112,256  were  males,  left  the  United  Kini:^- 
dom.  The  adult  males  were  classified  accordini^  to 
occupation,  as  follows  : 

Ai^rii-ultural  lal  orcrs 14,797 

Un-killc'l  lahniL  rs  and  miners 36.251 

Ocfupi-ition  wA  ^tatcil 2'). 663 

Mechanic-  and  -killcl  laliorcr.-, 9.717 

l''arnicr-  an!  L;ta/icrs 3.704 

C'lc-rk^  and  >ho[.i;cci/crs 4.773 

rrofcs--iiinal  men 11 ,467 

Mi-ccll.n!ciH!s 4.f'i4 

So  th:it  if  we  include  amoni;  the  unsldlled — as  we 
ma\-  rea->onal)l\' — those  \\ho.--c  occupations  are  not 
stated.  i>f  112.256  adult  males,  n.iore  than  ^'D.ooci.  or 
about  si\t\'-three  ])ercent..  wei'o  un-^lx-iHed  labiii'ers. 
lM"Mm  otlirr  counti'ies.  the  ]M'opi  M-tiMii  of  un-ki'iled 
laboi'cT^  is  >till  l,ii-L;-er.  [■"I'om  tl)e  ])iiint  of  view  of 
producti'iu  tliere  is  no  cau-e  f.  u-  alarm;  but.  from 
the   point    of   xic'w   of   the   w  ai^'es   ([uestion,  there  is, 


244  '^^^'^  Bargain  Theory  of  Wages. 


also,  unfortunately,  little  reason  for  regarding  emi- 
gration as  a  means  of  lessening  the  competition  for 
work.  As  the  table  on  page  239  shows,  the  relief  to 
the  labor  market  is  hardly  ever  given  when  it  is 
most  wanted.  When  ten  per  cent,  of  the  working 
population  of  the  country  are  out  of  work  the  emi- 
gration of  less  than  one  per  cent,  of  the  population 
or  about  two  per  cent,  of  the  working  population 
can  hardly  have  much  effect.  Emigration,  it  is 
true,  carries  out  a  considerable  proportion  of  the 
lower  classes  of  labor. 

Nothing,  probably,  would  benefit  the  working 
classes  more  than  the  remo\-al  of  the  competition  of 
the  casually  employed  and  semi-\-icious  class,*  but 
the  strenuous  objections  which  the  United  States 
and  the  colonies  raise  against  tlie  practice  of  assist- 
ing paupers  and  criminals  has  cffecti\'ely  checked  the 
tendenc}'  to  relie\'c  the  country  of  the  useless  and 
the  burdensome  members  of  the  community.  The 
number  actualh-  turned  back  from  New  York  is  not 
large  (in  1896,  only  2799  out  of  343,267,  and  of  those 
sent  back  776  were  refused  admission  under  the  con- 
tract-labor law),  but  the  deterrent  effect  must  be 
great.  The  shii^ping  agents  are  made  unwilling  to 
accept  such  passengers  and  therefore  look  more 
careful!}-  into  tlie  conditions  of  each  case.  \^olun- 
tar}-  agencies  ma\-  continue  to  send  children,  and 
those  who,  though  not  criminal,  are  not  exactly  de- 
sirable settlers:  but  the  relief  to  the  ])oor-rates  must 
be  inconsiderable  and   the  relief  to  the  competition 

*  Dooth,  Life  and  f.aio>\  vol.  i.,  p.  162. 


Eiiiii'-rtif/ioii  and  tJic  Labor  Market. 


2a; 


in  the  labor  market  still  less.  'l"he  general  effect  of 
eiiiii;ration  on  the  labor  market  and  on  the  wages 
question  either  for  l^oocI  or  e\il  cannot  be  \'er\-  j^n'cat. 
The  relief  afforded  is  not  ^re.'it  enouL;h,  nor  is  it 
'^■iven  at  the  ri^iit  time,  to  be  of  much  ad\-antai:jc. 
Indirecth-,  emii;r;iti()n,  b\-  cxti.:ndin;4'  the  market  and 
renderiu!^^  possible  L'Cononn'es  in  production  may 
benefit  tluy laboring;'  classes.  The  export  trade  of  a 
cumtry  will  increase  with  the  \-olume  of  emicn-ation 
and  there  will  be  a  larij;"er  dix'idcnd  to  distribute 
amoni;  the  o\vnei"s  of  the  different  factors  of  pro- 
duction. Enn'gration  may  also  enable  those  of  the 
workini^  classes  who  rem.un  behind  to  obtain  food 
and  other  necessaries  of  life  at  a  lower  labor  cost. 

The  effect  of  innni;4i"ation  on  the  \vaL;"es  (juestion 
requires  niore  serious  consideration  ;  because,  on 
this  point,  discussion  has  not  been  confined  to 
\"ague  i;'eneralities.  Di'finite  assertions  are  made 
reij^ardiui;"  tlie  effect  on  waives  and  in  niany  countries 
a  definite  jiojicy  of  restriction  has  been  adopted.  It 
is  alle!_;'ed  that  imnii;4raLion  unnaturall\-  increases 
competition  in  the  labor  market  and  increases  above 
all  unfair  competition  (^f  underpaid  kibor.  If  this 
be  the  result  of  immii^'ration,  tlie  molMJit}'  of  labor 
has  its  darker  side:  for  it  not  onl\-  tends  to  level  the 
wa;4es  u[)  Ijut  also,  it  ^;eem<.  to  lc\"el  w  aL^es  down. 

The  content Imu  that  immi;4ration  tend>  tc)  reduce 
waL^'es.  in  its  usurd  form,  is  based  ^m\  an  i;n([ualified 
acceptance  of  the  Subsistence  Thco,:-\-  of  wa;^\'s  ;  and 
the  an>wers  t')  tlie  contention  are  ;_;ene';all\"  little 
niore  than  unqualified  a»ertii)ns  of  tlie  l'roL!ucti\'it\' 


246  T)ie  Bargain  Theory  of  Wages. 


Theory.  If  wages  arc  determined  solely  by  the 
standard  of  comfort  which  the  lowest  class  of  com- 
peting' labor  has  adopted,  then  the  constantly,  re- 
newed competition  of  foreign  labor  with  a  low 
standard  of  life  miust,  as  constant  dripping  wears 
away  a  stone,  wear  away  the  resistance  which  the 
working  classes  can  oppose  to  the  lowering  of  the 
standard.  If  the  gates  of  the  country  were  thrown 
open  but  once  in  a  generation  to  the  crowd  of  half- 
fed,  half-clothed  foreigners,  there  might  be  some 
chance  of  successfully  resisting  the  tendency  to 
lower  the  standard,  by  bringing  all  the  influences  of 
a  higher  cix'ilization  to  bear  on  the  incoming  horde; 
but,  when  the  occasion  recurs  every  year,  and  each 
spring  brings  a  new  horde,  and  the  effort  of  re- 
sistance has  to  be  continuously  kept  up,  the  work  will 
never  be  done.  The  higher  standard  might  resist  a 
few  long  attacks;  but  persistent  attacks  \\\\\  wear 
out  the  energy  and  patience  of  the  defenders,  and 
reduce  them  to  a  sidlen  acquiescence  in  a  lower 
standard  of  life.  On.  the  other  hand,  if  we  accept 
the  easy  optimism  of  the  productix'ity  theor\-,  there 
is  no  wages  problem  to  be  faced.  We  mav  encour- 
age immigration,  as  much  as  we  please;  for  the 
newcomer  will  not,  simply  because  he  cannot,  dis- 
place the  old  hand.  The  newcomer  will  be  paid 
according  to  the  work  he  is  able  to  do.  If  his  effi- 
ciency be  as  high  as  the  standard  efficiency  of  the 
trade,  he  will  be  paid  the  standard  wage,  no  matter 
what  his  manner  of  life  may  be.  Pauper  labor  is 
pauper  labor  because  it  is  inefficient;  and  it  will  re- 


Ii/iiJiii^ratioii  and  IWigts.  247 


main  inefficient  prcjbabl}-  under  the  new  industrial 
conditions;  but  it  cannot  by  competition  reduce 
the  hiL;her  waives  of  more  efficient  labor.  The  an- 
swer to  the  contention  that  immiL;ration  may  preju- 
diciall}'  atfect  the  [)osilion  of  labor  practicall}'  consists 
in  the  iiu-entioii  of  a  new  style  of  economic  harmo- 
nies 1))'  means  of  which  we  ma}-  prove  that  fears  are 
L;r()undless,  for  no  possilole  e\il  can  possibly  exist. 

A  ([uestion  (if  fact,  howe\'er,  cannot  be  disposed 
of  in  such  an  air\-  \\a}\  I">\'en  if  in\estic;"ation  sIkav 
that  immi_c;i'ation  does  not  really  reduce  waj^es.  there 
is  at  least  some  j^'round  for  the  \\idespread  opinion 
that  it  has  this  tendency.  In  some  industries,  nota- 
bl\-  the  textile  industries  of  New  I'ln^iand,  a  fall  in 
A\'ai;es  has  coincided  with  an  inilux  of  cheap  forcii;n 
labor  into  the  district  and  the  industries;  and  the 
trade-union>  have  undoubtedh'  ^L;round  for  their 
support  of  the  contract-labor  law  because  foreign 
labor  has  certaiid}'  been  frecjuenth'  imported  to 
enable  the  emplo\er  to  resist  the  demands  (.)f  the 
union. 

In  the  first  place,  immii^-ration,  altlKnii^h  it  has 
sadl\-  deteriorated  in  (|ualit\-  in  the  last  deCcules  (and 
the  competition  of  the  low  est  i^rades  is  alw.u's  deadh', 
as  Mr.  Booth  has  pointed  out)  can  haixlh-  lower 
WML^es  l)ecause  of  the  actual  increase  in  tlie  number 
of  conijK'lilors.  The  vohime  of  innni;_;'ration,  i:^reat 
though  it  is,  and  composed  three  fourths  of  al)lc- 
bodietl  men  in  the  prime  of  life',  bears  onl_\-  a  snudl 
])roportion  to  the  actual  bod\-  of  l,d)or — small  at 
least,  \\  hen  we  take  into  account  that  ex'cry  industry 


248  Tlic  Bargain  Theory  of  Wages. 


in  a  new  country  is  subject  to  the  law  of  increasing 
returns.  Though  the  average  annual  immigration 
has  increased  enormously  since  i860,  the  amount  of 
capital  invested  in  industry  and  the  total  produce  of 
industry  have  increased  much  more  rapidly.  In- 
dustry has  developed  so  quickly  that  it  has  been 
able  to  absorb  all  the  immigration:  in  j^art  the  rapid 
development  has  been  due  to  the  great  volume  of 
immigration.  As  the  West  fills  up,  the  power  of 
absorption,  on  the  part  of  the  United  States  at  least, 
will  probably  decrease ;  and  then  the  problem  set  by 
immigration  will  become  more  actual.  As  things 
are,  at  times  during  the  last  decade  it  has  seemed  as 
if  the  United  States  had  already  absorbed  to  satura- 
tion point.  The  fdling  up  of  the  \W\st  will  ha\-e  one 
important  consec|uence.  So  long  as  there  is  good 
land  available  in  the  quantity  desired  the  returns 
to  agricultural  labor  \\\\\  govern  city  wages,  but, 
as  the  country  fills  up,  the  wages  of  the  cit\',  mak- 
ing allowance  for  the  higher  efficiency  of  city  labor, 
will  come  to  be  standard  for  the  country.  Even 
now,  the  great  majority  of  the  immigrants  do  not 
go  West,  but  remain  at  the  port  of  entr}-,  or  herd 
in  a  few  of  the  larger  cities  ^\'llere  chance  has  placed 
them  and  circumstances  have  de\'eloped  a  suitable 
inilicii  for  them.  In  these  cities  their  competition 
may  ser\'e  to  lower  wages  for  their  class  of  work, 
and  iiidireclly  to  lower  wages  not  onh'  in  the  cities 
but  all  over  the  country,  j)ro\ided  that  the  old  sup- 
ply of  l.ibor  is  maintained  in  that  class. 

The  old  suppl)',  howcx'er,  is  not  being  maintained. 


The  Displacin^^  of  Native  Laborers. 


249 


It  is  a  wcll-cstablishccl  fdcl  that  the  native  workmen 
are  i;ein;4"  dis[)hiced  but  only  b)-  beini;  forced  up 
hii;her  in  the  scale.  In  the  same  \va\',  as  the  com- 
petition of  women  is  displacini;'  male  workers,  not 
by  de_L^r;idin_L;-  them  but  by  forcini;'  them  to  seek 
emplo\-ment  in  the  higher  occu[)ations  which  the 
progress  of  science  is  constantl}-  openini;  uj),  the 
Competition  of  immi^n'ant  labor  has,  in  some  cases, 
forced  ^American  labor  into  new  channels  of  acti\'ity. 
It  mi^ht  even  be  more  correct  to  say  that  the  opcn- 
in^r  of  the  new  channels  for  American  labor  has 
createtl  the  \'acuum  which  foreii^n  immi^i;'ration  has 
llowed  in  to  fill.  It  has  been,  on  a  vaster  scale,  a 
case  of  suction  from  within,  rather  than  pressure 
from  without.  The  i;reat  increase  of  immiL^ration, 
in  the  earl)'  ei!.dities,  c.ime  to  meet  the  demands  of 
a  iperiod  of  railroad  expansion.  The  immi<:^rant 
labor  [)erformed  a  t;isk  which  there  was  no  labor  in 
America  to  i)erform.  The  natix'e  American  has,  in 
his  time,  performed  as  L;'reat  a  task.  He  has  cleared 
and  settletl  the  land;  but  he  is  by  nature  an  indi- 
\-idualist,  and  has  nexer  sliown  any  disposition  to 
labor  in  i^anj^s.  .American  lal)or  was  more  profitably 
and  moi'c  congenially  em})l(^yed  ;  and  when  the  de- 
mantl  occurred  forei^ai  labor  was  practical!)-  invited 
in.  The  i;reat  \-oIume  of  immi^n'ation  was  due  more 
to  Americ.ui  necessities  than  to  Kuro[)ean  po\-ert)' 
and  oppression.  That  there  Iku'C  been  intli\-idual  and 
local  hard,-.hi[)s  to  nati\'e  labor  in  America  durin^^ 
the  process  cannot  be  denied;  liut  these  hardships 
are  such  as  follow  e\'er)-  economic  change. 


250  The  Bargain  Theory  of  ]\^agcs. 


The  whole  contention  for  restriction  of  immigrants 
has  been  based  on  the  tacit  assumption  that  for- 
eigners prefer  to  accept  lower  wages.  Few  men, 
when  they  argue,  are  so  clear-sighted  as  the  Toronto 
mechanic  who  declared,  in  his  evidence  before  the 
Canadian  Labor  Commission,  that  "  men  ne\-er  fight 
for  lower  wages,  but  try  all  the}'  can  to  get  higher 
wages."  ■'•"  Immigrants  may  be  willing,  during  their 
short  apprenticeship  to  the  new  conditions  to  accept 
less  than  the  standard  rate  of  wages;  but  they  are 

exceptions  when  they  stick  to  that  tendency  right 
through."  t  It  must  be  surprising  to  the  supporters 
of  the  standard-of-comfort  theory  to  see  how  very 
soon  the  newcomers  rise  to  their  pri\  ilcges,  and  re- 
gard high  wages  as  their  necessary  and  just  reward. 
Mr.  Gould  proves  in  his  pamphlet  T/w  Social  Con- 
dition of  Labor  that  the  foreigner  is  not  long  in  rising 
to  the  native-wage  standard.  Foreign  workmen  of 
British  or  German  origin,  instead  of  untlerselling 
the  nati\'e  workmen,  actually  receive,  on  the  whole, 
higher  wages,  partly  because,  in  the  displacing  pro- 
cess whicli  made  room  for  the  foreigner,  oidy  the 
less  intelligent  native  workers  had  been  left.  An 
influx  of  foreign  workmen  may  indicate  a  lower 
standard  of  efficiency,  but  is  rarely  the  cause  of  the 
lowering  of  the  standard.  The  influx  of  tlie  h^-ench 
Canadians  into  the  New  England  mills  and  factories 
occurred  about  the  same  time  as  a  fall  in  wages  of 
the  native  workers;   but,   though  the  popular  con- 

*  CanadiiDi  Labor  Commission,  "Ontario  Evidence,"  p.  2. 

ty/'/v/,,p.  367. 


The  W'a^i^'fs  of  I''iut-i^ni-lH>n:  Laborers.        251 


elusion  is  not  unnatural,  it  nia}-  be  that  the  more 
intellii^ent  of  the  textile  workers  had  been  displaced 
u[)\\ards.  anil  that  those  who  remained  behind  were 
worth  onl\-  the  lower  waL;es  the\'  recei\'ed.  What 
is  true  of  the  workmen  of  Hrilish  or  (jerman  orisjin 
is  ti'ue,  thou_L;h  in  a  less  marked  decree,  of  e\'en  the 
ck,\L;i'ailed  "  l).ii;()es,"  I'oles,  antl  lV)hemians.  F.\-en 
these  immigrants  show  \'er\-  little  tendenc}'  to  j)eople 
down  to  their  squcdor.  Their  stancku'd  of  life  may 
not  be  \-ery  much  hii^iier  than  when  the}'  landed; 
but  their  sa\-ini;'s  bank  account  is.  The  i^'reat  eco- 
nomic objection  which  can  be  taken  to  this  class  of 
imnn'i;rant  is  not  that  the\-  reduce  ^\•al;es  by  their 
low  ^tandaril,  but  that  the}-  sa\'e  too  much  and  spend 
too  little.'"  The  objection  has  especial  force  when, 
as  in  the  case  of  the  Italian  and  hh'ench-Canadian 
immigrants,  the  object  of  the  sax'ing'  is  to  acquire 
some  small  pi'oi)ert}-  in  the  native  land  and  return 
liiiiher,  as  soon  as  possible,  to  ijenteel  affluence. 
It  is  not  that  the}-  are  not  i;'ood  workmen,  or  that 
tliex"  lower  the  w;i>4es  of  others  thr(ju.i;"li  their  scpialid 
mode  of  life;  but  that  they  are  not  i;ood  citizens, 
nor  e\"er  can  be,  so  Ion;,;'  as  tlic}-  cherish  the  hope  of 
lea\-inL;"  the  country  when  their  sa\'inL;-s  are  lari^e 
enoui^di.  When  the  immic^rant  comes  with  the  in- 
tention vi  settliiiL;".  his  standard  of  life  so>)n  rises. 
The  elex'ation  is  effected  in  a  com])arati\-el}-  simple 
wa\'.  The  famih'  C(.-ases  to  loe  the  waL;e-eai'niiii;' 
unit  ;  and  with  the  continual  presence  of  tlie  mother 
in    the   liome.  a  famil\-   life   in    the   sen-^e  in  which  it 

*  (,'oniiccticut  ISiircau  nf  Labor  Statistics,  /i';'/iv7,   i?S5,  p.  6o. 


252  The  Bargain  TJicory  of  Wages. 


could  not  exist  before  begins.  Except  in  those 
cases,  such  as  the  French  Canadian  and  the  Itahan, 
where  there  is  a  deHberate  intention  to  return  as 
soon  as  possible  to  the  native  country  to  enjoy  a 
cleared  patrimony,  the  female  members  of  the  im- 
migrant family  seldom  continue  long  to  go  out  to 
work  to  eke  out  the  earnings  of  the  head  of  the 
house.  No  consequences  in  industrial  life  seem 
surer  than  the  fact,  that  when  a  man  can  rely 
on  the  supplemental  earnings  of  his  wife  and  chil- 
dren his  own  wages  are  low.  In  many  cases,  the 
family  must  be  taken  as  the  wage-earning  unit; 
and  with  this  as  the  ground  of  comparison  it  does 
not  appear  that  wages  in  Germany  are  so  very 
much  lower  than  wages  in  America.  The  difference 
is  certainly  not  so  great  as  the  difference  between 
the  wages  of  the  German  and  the  wages  of  the 
American  workman.  When  the  German  workman 
becomes  an  American  immigrant  the  family  earnings 
remain  at  nearly  the  same  amount;  but  the  amount 
is  no  longer  made  up  by  petty  contributions  from 
all  the  members  of  the  family.  The  head  of  the 
family  now  contributes  the  whole  amount,  for,  in- 
fluenced by  the  example  of  the  country,  he  has  in 
great  measure  ceased  to  send  his  wife  out  to  the 
workshop. 

The  contention  that  the  immigration  of  hordes  of 
men  with  low  standards  of  liv'iiig  must  eventually 
reduce  wages  is  based  on  Ricardc^'s  assumption  that 
wages  must  fall,  A\hich,  in  its  turn,  is  based  on  the 
Malthusian  doctrine  that  men  will  necessarily  people 


The  Standard  of  Lkniig. 


253 


down  to  their  staiulaitl  of  comfort.  On  the  con- 
trar}-,  however,  the  niari;in  for  saxiii^L,''  which  even  the 
most  dcL^ratled,  and  least  desirable  from  a  political 
point  of  \iew,  possess,  shows  that  the  Malthusian 
assumption  is  not  directh'  and  unconditionally  true. 
If  we  i;i\e  up  the  Malthusian  doctrine  behind  Ri- 
cardo's  assumption,  the  contention  that  the  low 
standard  of  li\-ini;"  amons^r  the  immii;rants  must 
lower  wa<;es  for  n.itive  labor  loses  much  of  its  force. 
So  \on<^  as  the  immiin'ants  do  not  people  down  to 
their  standard,  the  lowness  of  the  standard  may  be 
a  social  e\il  of  the  first  mas^nitude;  but  it  does  not 
reduce  the  wages,  and  consequently  cannot  reduce 
the  standard  of  the  native  workman. 


CHAPTER   VII. 


TRADE-UNIONS   AS   A   WAGES   FACTOR. 


THE  Austrian  school,  in  their  efforts  to  estabHsh 
the  theory  of  distribution  that  the  value  of 
labor  is  reflected  back  from  the  value  of  the  con- 
sumption goods  it  is  employed  in  making,  have 
overlooked  one  important  factor  in  the  determina- 
tion of  wages.  It  is  not  only  overlooked  but,  by 
critical  implication,  rejected  by  Dr.  Smart  in  his 
recent  Studies  in  Economics.  This  rejection  is  the 
more  remarkable  that  it  not  only  prevents  them 
from  recognizing  one  of  the  most  potent  facts  in 
modern  industrial  life,  and,  thus,  gi\-es  an  air  of  un- 
reality to  their  ^\•lu)le  theory,  but  also  is  inconsistent 
with  their  own  theor\-.  The  doctrine  of  a  lix'ing 
wage  they  reject  because  it  seems  to  gi\'e  labor  a 
predetermined  \'alue;  yet  on  the  grounds  oi  their 
own  theory,  the  standard  of  a  li\-ing  wage  remains 
ont;  of  the  most  important  determinants  of  wages. 

On  page  6i.  of  the  bitrodiictioi  to  tlic  llicory  of 
lvalue,  by  Dr.  Smart,  immediately  following  the 
enunciati(jn  of  the  law  that  price  is  determined  somc- 

254 


The  La\c  of  tltc  Maro;i)ial  Pair. 


255 


where  between  the  subjecti\"e  vahiatioiis  of  the  last 
bii\-er  aiul  the  hist  seller,  who  to^^ether  are  pictu- 
resciuel)-  called  "  the  Marginal  I'liir, "  there  stands 
this  par.ii;raph  : 

"  But  in  the  business  world  itself  there  is  one  great 
simplitication  of  the  law  of  llie  marginal  pair.  In  mod- 
ern induslrv  producers  do  not  make  for  themselves,  but 
for  the  market,  and  the  amount  of  their  own  produets 
whirh  the\-  could  use  in  their  own  consumption  is  insig- 
niticant.  C'onsetiuently  it  may  almost  be  said  that  such 
goods  liave  no  subjective  value  for  the  sellers,  and  we 
lose  one  whole  side  of  our  valuations  .  .  .  practically, 
then  our  law  takes  tins  form  :  brice  is  determined  by 
the  \aluation  of  the  Maruinal  Ibiver."  * 


It  may  be  true,  as  Dr.  Smart  contends,  that  the 
\'ahie  of  labor  is  simply  a  case  of  the  general  law  of 
wilue,  and  therefr)re  entirely  dependent  on  utility, 
ha\ing,  therefore,  "  no  predetermined  \-alue  ";  but 
it  does  not  follow  therefrom  that  the  wages  problem 
is  a  simple  (.)r  simplified  case  of  the  general  law. 
Labor  would  get  its  "  \-alue  entirel\-  from  what  it 
produces, "l-  onl\-  under  the  condition  that  labor  is  a 
good  of  precisel}-  the  same  character  as  all  other 
pr(jdLiction  goods  ha\-ir,g  "  no  sidjjective  value  for 
the  sellers."  The  \-cr_\-  exi>tence  of  the  modern 
labor  (|Uc■^tion  is  proof  enough  that  labor  is  not  sub- 
ject to  this  gi-eat  simplification  of  the  law  of  the 
Marginal  I'air.      The   empl<\\-er.  the  marginal  buyer 

*  Sin. in,  h::i wiuitioyi  to  t!'.c  Thccyy  0/  I'dluc,  p.  Oi. 


256  Tlie  Bargain  TJieory  of  Wages. 


in  this  case,  has  not  the  only  word  to  say  in  the  de- 
termination of  the  price  of  labor.  The  seller  claims 
vehemently  that  he  must  be  consulted  and  the  trade- 
union  movement  is  an  effort  to  give  force  to  his 
claim.  The  valuation  of  the  buyer,  which  is,  in 
effect,  the  estimate  which  the  employer  makes  of 
the  efficiency  of  the  labor,  is  only  one  of  the  deter- 
minants of  wages.  Labor,  in  spite  of  sentimental 
objections,  is  undoubtedly  a  commodity  which  is 
bought  and  sold.  It  serves  no  useful  purpose  to 
speak  of  selling  the  fruits  of  labor.  Labor  is  a  com- 
modity subject  to  market  conditions;  but  it  is  not 
therefore  true  that  labor  is  a  commodity  resembling 
in  all  essential  respects  every  other  commodity  in 
the  market. 

Labor  differs  from  most,  if  not  all,  other  com- 
modities in  retaining,  even  under  modern  industrial 
conditions,  its  subjective  value  to  the  seller.  We 
cannot  separate  the  labor  and  the  laborer.  It  is 
labor  that  is  bought  and  sold  but,  with  the  labor, 
goes  the  laborer.  Therefore  instead  of  a  great 
simplification  we  have  a  great  complication.  The 
subjective  valuation  placed  upon  labor  is  not  en- 
tirely derived  from  what  it  produces  or  from  that 
which  is  obtained  in  exchange  for  its  product.  The 
direct  utility  to  the  laborer  of  that  which  he  sells 
may  not  be  very  great.  Modern  agrarian  con- 
ditions deny  to  the  great  majority  of  laborers  the 
possibility  of  being  able  to  consume  what  they  pro- 
duce. The  peasant  proprietor,  or  even  the  modern 
farmer,  may  produce  all  that  he  consumes  and  pro- 


Labor  not  a  Sii/iph-  Case  of  I  'aliic. 


257 


ducc  little  besides  what  he  does  consume;  but,  to 
tluj  i;"reat  majority  of  laborers  it  is  a  ph\-sical  impos- 
sibilit}'  for  them  to  consume  more  than  an  infinitesi- 
mal fr.iction  c)f  what  the\-  produce.  It  does  not, 
howe\er,  in\'ol\'e  any  unjustifiable  sti'etch  of  lan- 
L;uaL;'e  to  sa\-  that,  since  labor  and  the  l.iborer  cannot 
br  sej)arated  in  fact,  labor  has  a  \ery  definite  sub- 
ject i\'e  Vcdue  put  mjon  it,  and  with  this  estimate 
ujjou  it,  enters  the  mai'ket.  lC\'en  if  permission  be 
not  <4i\'en  to  sa_\-  that  labor  retains  its  subjective 
\-aluation,  under  modei'n  industrial  conditions,  yet, 
without  fear  of  contradiction,  we  may  say  that  labor, 
invoh-iuL;' disutilit)',  demands  a  return  of  sufficiently 
s^n"eat  ulilit}-,  at  least  to  ccnmterbalance  the  disutility 
incurred;  ^\•hich.  if  it  be  not  precisely  the  same  as  a 
direct  subjecti\'e  estimate,  is,  in  practice  precisely 
e([ui\-alent  t(^  it. 

The  law  of  the  value  of  labor  is  the  law  of  <:^eneral 
\'a!ue  without  the  i^reat  simplification;  and  the  price 
of  labor  will  lie  somewhere  between  the  SLd:)jecti\'e 
estimates  of  the  buyer  and  the  sidojective  estimates 
of  the  seller.  The  estimate  of  the  buyer  of  lal)or, 
/.  (.,  the  employer  of  labor,  will  form  the  upper 
limit:  the  estimate  of  the  seller  will  form  the  lower 
limit.  Hctween  these  liniits,  the  \'alue  of  labor,  or 
the  waL^es  of  the  lalxM'er,  will  l)e  determined;  and 
the  result  will  de[)end  on  tin-  comparati\'e  stren^^th 
r>f  the  barL;,iinei-s.  That  the  seller  is  often  at  a  i^reat 
disad\'anla;j,e  because  he  must  sell,  while  the  bu\'er 
need  not  bu\',  docs  not  dispi-<  iw  tlu'  statement. 
This  hard  f.ict  is  one  of  the   forces  which   lto  to  de- 


258  TJlc  Bargain  Theory  of  Wages. 


termine  what  the  subjective  estimate  may  be;  and 
one  of  the  forces  which  determine  where  between 
the  limits  the  actual  price  of  the  laborer  shall  lie. 
The  upper  limit  will  be  determined  b\-  the  emplo}-er's 
estimate  of  the  ef^ciency  of  labor  working  in  co- 
operation with  machinery  and  other  instruments  of 
capital.  The  lower  limit  cannot  be  a  ph}'sical  mini- 
mum, as  Dr.  Smart  argues  in  his  study  of  the  liv- 
ing wage,""  or  e\-en  a  fixed  limit.  The  subjecti\-c 
estimate  placed  on  labor  by  the  laborer  is  essentially 
indi\'idual  and  is  not  so  greatly  affected  as  the  sub- 
jective estimate  on  other  commodities  is.  by  the 
social  estimate  placed  on  it.  Labor  is  an  indi\'idual 
exertion  ;  and  the  estimate  which  each  man  places 
on  his  labor  depends  upon  the  irksomeness  of  labor 
to  himself;  and  the  degree  of  irksomeness  will 
hardly  ever  be  the  same  for  two  different  laborers  or 
even  for  the  sanie  laborer  on  two  different  da}-s. 
The  lower  limit  of  wages  is  not  an  absolute  limit. 
Any  circumstance  which  intensifies  the  necessities 
of  the  laborer,  every  hostage  gi\'en  to  fortune,  tends 
to  lower  the  minimum.  The  lower  limit  is.  after  all 
is  said,  an  opinion  the  laborer  has  of  his  needs  and 
his  merits,  which  for  the  time  being  he  is  prepared 
to  stand  b}-,  and  for  which,  if  need  be,  he  is  pre- 
pared to  fight.  It  may  be  a  plu'sical  minimnm  or  it 
ma\'  be  a  standard  of  comfort;  but  in  neither  case 
is  it  a  fixed  limit.  Necessity  of  competition  may 
compel  him  to  lower  his  estimate  and  accept  a  lower 
price   for  his  labor.      The  laborer,  as  Thornton  in- 

*  Smart,  Sluiiics  in  Eci^uor/iics,  cliap.  i. 


TJic  Limits  of  ]]'ai!;cs. 


•59 


sistcd,  cannot  stand  out  for  his  price.  He  must  live 
by  his  hibor;  and  the  body  is  more  than  raiment. 

So  \owj^  as  we.dlh  is  increasinu^  twice  as  fast  as 
po[)vdation,  and  the  total  product  increases  more 
cpiickl)-  than  tlie  share  of  it  paid  to  the  hdjorcr,  there 
is  not  much  chiiiL^er  tliat  the  ^'eneral  body  of  hUjorers 
will  be  called  upon  to  fii^ht  to  maintain  their  sub- 
ject i\'e  estimate.  W'a^es  ha\'e  risen,  and  are  likely 
to  continue  ri-uni;'.  The  suhjectivc  estimate  of  the 
laborer  has  risen  with  the  ri-^c  of  wai^x's :  his  standard 
of  comfort  is  hiL;"hei-.  ami  his  standaial  of  subsistence 
is  higher.  Whether  the  ri-^e  in  the  standard  would 
be  maintained  throuL;"h  a  lonj;^  period  of  depression 
cannot  be  cb'termined  a  priori ;  and  it  will  be  well  if 
we  are  ne\er  calk'd  on  to  tlraw  a  conclusion  a  pos- 
teriori. It  is  not  necessary  that  the  limits  should 
be  fixed  and  ab<r)lute.  b^)r  the  time  being  aiid 
under  \\\o  ordinary  i)i-essure  of  circumstances,  these 
limits  h;i\-e  the  same  effect  as  if  the\-  were  immo\'- 
able.  With  c<  iiit  inL;'encies  we  cannot  wiseh'  deal. 
HL'tween  tiiose  two  limits  the  \alue  of  labor  will  be 
tk'termined  h\-  the  C(Miip;irati\"e  necessities  of  the 
barL;.niK'rs  and  b\"  the  compiirati\"e  knowledL^e  and 
skill  in  barL;;u'nini;'  which  each  part\-  brins^'s  to  bear. 
If  we  repi'esent  the  upper  limit  h\  T2x.  and  the 
lower  limit  I)\"  (jX,  the  law  of  X'alue  ck-clares  that  the 
x'alue  of  l.d)  ii'will  lie  between  ()x  and  T2x:  whether 
wai^i'-  ,!i'e  lox  or  nx  depends  oil  the-  coniparati\"e 
str(;n_L;'th  i>f  t!u'  barL:,ainers. 

Theoi-et  icallw  an\-  force  which  o|)crates  on  the 
value  of  lal^oi'  ma\-  tend   either  to  raise  or  to  lower 


26o  TJie  Bargain  Theory  of  Wages. 


^vages;  and  in  practice,  in  individual  cases,  wages 
may  fall  as  well  as  rise.  Practicall}-,  however,  the 
long  steady  advance  of  both  nominal  and  real  wages 
has  so  accustomed  us  to  consider  only  the  more 
hopeful  side  of  the  \\-ages  question  that  we  reject  as 
merely  theoretical  any  discussion  of  falling  wages. 
Wages,  according  to  the  \"ie\v  set  forth  above,  may 
rise  in  three  wa}-s,  viz.,  b}'  increasing  the  seller's 
valuation,  by  increasing  the  buyer's  \'aluation,  or  by 
improving  the  position  of  the  laborer  as  a  bargainer. 
To  put  the  same  statement  s}'mbolically,  we  may 
sa}-  that  wages  may  rise  if  gx  is  raised  to  lox,  I2x 
remaining  stati(^nary ;  or  qx  remaining  stationary, 
if  I2X  increases  to  ijx;  or  again,  the  limits  remain- 
ing the  same,  if  the  laborer's  position  is  so  much 
improved  that,  in  the  "  higgling  "  of  the  market,  he 
can  obtain  better  terms,  iix,  sa\',  instead  of  lOx. 
We  ma\-  treat  each  of  these  methods  separately, 
though,  as  a  matter  of  fact,  the\-  react  on  each  other 
and  seem  to  change  simultaneously.  We  can  hardly 
improx'e  the  position  of  the  laborer  as  a  bargainer 
V.  itliout  at  the  same  time,  or  pre\-iousl\',  raising  his 
estimate  of  what  liis  work  is  \\X)rth  \o  him  :  nor  can 
\\'e  raise  the  lower  limit  without  strengtliening  the 
laborer  in  his  l^argaining.  The  upper  limit  is  less 
subject  to  reciprocal  influences.  It  is  the  em];)]o\-er's 
estimate,  and  is  less  likel}'  to  change  than  the  lower 
limit.  Wages  can  hardly  rise  abo\'e  the  employer's 
estimate  based  on  the  efficiency  of  the  labor.  What 
he  pays  is,  natural!}-,  no  perfect  guide  to  what  he 
might  pay  if  necessar\-,  but  the  upper  lin^iit,  though 


/  'ariatio)is  in  tJic  LiDiits. 


iGi 


necessarily  to  the  worker  an  unknown  (iiiantil}',  is 
none  the  less  a  very  tleterniinale  (juantit)'.  There 
is  no  necessit)-  upon  the  eni[)Io\'er  to  allow  thi^  limit 
to  be  i)assecl  as  there  nia\-  be  on  the  employee  to 
accept  less  than  the  lower  estimate,  ^'et  there  is  a 
teiulenc}'  for  the  limits  to  mo\'e  t(.);_;ether,  to  advance 
toL^ether  or  to  fall  back  to^etlier,  lik'e  the  two  ends 
of  a  piston  rod.  The}'  ]'Cee[)  theii'  dist.ince  because 
an  increased  subjectix'e  estimate  b\'  the  laborer  of 
the  woi'th  of  his  labor  makes  liim  a  more  efficient 
wo!'km;Mi  ;  and  whether  he  is  or  is  not  paid  accord- 
in<4"  to  his  efficienc}'  it  is  economically  possible  for 
him  to  demand  the  higher  waL>"e  v\'ithout  Ijrin^insj 
industrx'  to  a  standstill. 

The  laborer  can  only  b)-  increasiiu^^  his  efficiency 
raise  the  u[)per  limit  of  waives;  and  pr,icticall\-  the 
w.trkiiiv;"  classes  as  a  whole  ha\e  been  content  to  try 
to  rai^c  wa;j,'es  by  raisin-^'-  the  lower  limit  below  which 
it  is  difilcult  for  was^'cs  to  fall,  or  b\-  impr()vini_^  their 
[iosition  as  bai'L^aincrs.  These  methods  foitunately 
tend  to  make  the  laborer  m(M'e  efficient  and  thus  in- 
directl)-  I'ai-^e  the  ui')[)er  limit  of  waLi,'es  ;  but  tliey  do  so 
indirect!}'.  I'". \lt_\- social  and  moi'.d  force,  e\'ei'\'  law 
aiul  custom.  ewiA'  mc.'isure  of  education  and  mental 
imprt'X-ement  which  tends  to  increase  the  laborer's 
dii^nity  and  self-re<pect ,  e\ei'}'  chanL;'e  in  his  en\'iron- 
ment  and  in  the  jniblic  opinion  rej^irdiii;.;'  liis  mode 
of  life  and  work.  e\'er\'  impi'owment  iu  tkie  sani- 
tary condiitioii-;  of  \vorl<>hop  or  d\\  Lllin;.;-place  which 
tends  to  malce  a  more  human  life  a  po-,sil)ilit\'  will 
act   in   the   directi'^n   of   raisiu'j"   his   estimate  of   his 


262  The  Bargain  Theory  of  Wages. 


work,  because  raising  his  estimate  of  himself.  To 
increase  the  hiborer's  self-respect  is  one  of  the  surest 
ways  of  raising  his  wages;  and  this,  apart  from  the 
effect  which  increased  self-respect  will  have  on  effi- 
ciency. On  the  other  hand,  an  increased  efficiency 
of  labor  tends  to  raise  the  upper  limit.  Increased 
technical  skill  and  improved  general  education 
render  it  possible  to  employ  new  and  improved 
machinery  and  to  adopt  processes  of  manufacture 
which  a  lower  level  of  general  education  had  made 
it  uneconomical  to  employ.  T^'om  the  resulting 
increased  product  the  employer  is  able,  though  not 
necessarily  disposed,  to  hand  over  a  larger  share  to 
labor;  and  can  hand  over  a  larger  share  without 
economic  danger  to  industry.  There  does  not  seem 
very  much  ground  for  the  position  taken  by  many 
modern  writers  on  wages,  that  remuneration  is 
strictly  proportioned  to  efficiency  if,  at  any  rate, 
this  be  taken  to  mean  that  wages  and  efficiency  are 
almost  con\'ertible  terms.  That  the  employer  can 
pay  higher  wages  is  PiO  economic  reason  why  he 
should  pay  them  ;  and  there  is  often  very  little  rea- 
son to  belie\'e  that  he  does  pay  them.  It  is  true 
that  both  wages  and  efiiciency  have  increased 
during  the  last  half  century  but  we  cannot  take  the 
one  as  the  measure  of  the  other.  Indeed,  when  we 
consider  that  the  amount  of  ca[)ital  employed  has 
increased  much  faster  than  the  amount  of  the  prod- 
uct, and  that  wages  have  increased  in  a  higher  ratio 
than  either,  it  is  e\-ident  that  efficiency  and  wages 
do   not   necessarily  correspond.      W^hat   we  can  say 


The  Reciprocal  Iiijlticncc  of  the  Limits.        263 


is,  that  out  of  llic  incrcascil  product  the  employer 
may  and  can  [)ay  a  hir^er  absolute,  if  not  a  lar<^^er 
relati\'e  share  to  labor. 

The  most  hopeful  feature  of  the  industrial  situa- 
tion is  that  these  two  methods  of  increasinj^  wa^es 
react  on  each  other.  Increased  waives,  and  still 
more  increaseil  li^sure,  not  only  help  to  promote 
a  hiL;her  tle^ree  (jf  self-respect  and  of  human  dii;- 
nil\-  but  also  U)  raise  the  standard  of  efficienc}'.  It 
woul'J  be  impossible  to  measure,  e\en  had  we  the 
aitl  of  definite  statistics,  how  far  a  better  man  is  a 
better  workman;  but  it  is  none  the  less  true,  thoui^di 
we  cannot  measure,  that  whate\'er  tends  to  raise  the 
workers  self-respect,  whatex'er  increases  his  fruc;ality 
and  sobriet)',  whatex'er  cpucl^ens  his  intelligence  and 
en!ii;htens  his  mor.d  sense,  has  a  direct  and  immedi- 
ate effect  in  raisini;'  his  el'ficiency.  To  raise  the 
seller's  \',il nation  of  what  he  has  to  sell  is  one  \'ei'}' 
sure.  thou_i;h  indirect,  way  of  raisiiiL,^  the  bu\-er's 
estimate  of  what  he  wishes  to  buy;  and  an\-  increase 
of  wai^^es  obtained  as  a  result  of  the  moral  elevation 
of  the  workinL;man,  is  doubh'  secured  to  him  against 
reversal. 

Trade-unionism  has  as  \'et  done  little  to  raise  the 
standard  of  efficiency  directly  ;  althouL;h  it  is  |)ossible 
!))•  means  of  (_'ncourai;ement  to  technical  education 
that  much  mii;ht  be  effectetl.  So  far  tlie  effect  ^A 
m.m_\'  tr.ide-union  rei^ulations  and  of  the  notion, 
which  Mr.  Schloss  calls  the  theory  of  tlie  Lum[)  of 
Work,  that  inspires  those  reL;ulations  has  rather  been 
to  (.li-cour,iL;e  an)-  tendciic)"  towards  increased  effi- 


264  TJic  Bargain  Tlicory  of  Wages. 


cicncy.  While  the  idea  persists  that  the  man  who 
docs  his  best  is  a  traitor  to  the  cause  of  labor,  trade- 
unions  will  do  little  directly  to  make  it  possible  to 
raise  the  upper  limit  of  wages.  Indirectly,  however, 
trade-unionism  has  done  much  to  raise  the  standard 
of  work.  Not  only  has  it  insisted  that  each  member 
of  the  union  shall  earn  the  standard  wage,  but,  as 
Prof.  i\Iarshall  points  out,'"^  by  quickening  the  intel- 
ligence, by  elevating  the  dignity  of  labor  and  pro- 
moting, in  Parliament  and  elsewhere,  measures 
which  increase  the  self-respect  of  the  laborer,  it  has 
undoubtedly  contributed  to  an  improvement  of  the 
quality  of  the  work  done.  It  is,  however,  only  in 
this  indirect  \\ay,  that  trade-unionism  has  been  able 
to  raise  the  upper  limit  of  wages.  By  its  influence, 
the  lower  limit  may  rise  from  qx  to  (say)  lox,  and, 
indirectly,  the  upper  limit  way  ha\-e  a  tendency  to 
rise  to  13X;  but  the  influence  is  neither  so  great  nor 
so  unique  as  to  justify  the  claims  of  enthusiastic 
unionists  or  a  separate  treatment  of  the  trade-unions 
as  a  factor  in  the  labor  market.  Its  influence  in 
raising  the  self-respect  of  the  labor  is  not  much 
more  important  than  the  influence  of  the  temperance 
mo\-ement,  i)\  the  extension  of  the  franchise;  and 
there  can  be  no  doubt  that  a  higher  standard  of 
pojnilar  education  docs  much  more  to  increase  in- 
dustrial efficienc}'  thaii  all  the  multiplicity  of  trade- 
unions  and  working-class  associations. 
•  It  is  in  connection  with  the  third  method  of  rais- 
ing ^\•ages  that  trade-unionism  chiefly  merits  treat- 

*  I-'.conoruics  of  I)id!(stry,  bk.  vi.,  cxiii. 


Trciilc  (nioiihiii  and  W'a^^ws  Juir^iidiiiiiiii.      2<^>^ 


meat  as  a  jjowcrfiil  factor  in  the  Wages  Problem. 
The  influence  of  the  unions  has  been  general!}- 
directed  rather  to  making  the  best  use  of  what  at 
present  exists  than  to  altering  the  sfdtus  quo.  Their 
induence  is  most  readily  discernible  in  the  endea\-or 
to  imprme  the  laborer's  position  as  a  bargainer. 
I'",xcej)t  in  the  case  of  the  sul)j\'Cti\'e  disutilities  of 
labor  which  arise  from  the  material  conditions  in 
which  the  laborer  works,  trade-unionism  has  rarely 
attempted  the  more  difficult  task  of  raising  the  limits 
of  wages.  The  result  is  too  remote  and  can  hardly 
be  foreseen.  The  steps  to  be  taken  to  make  Qx, 
I  ox,  or  to  raise  I2x  to  13X,  do  not  readih*  commend 
themseh'cs  to  the  ax'erage  member  of  the  union  as 
s()mething  for  which  he  ought  to  make  sacrifices. 
The  unions,  as  we  shall  see,  must  appeal  to  the 
fighting  instinct  in  their  mend)ers  to  maintain  disci- 
pline :  and  the  dcsirabilii\-  of  legitimate!}-  raising  the 
limits  within  which  wages  are  determinetl  lias  never 
been  a  matter  of  contention.  Tlie  unions  ha\-e  con- 
fined themsel\-es  to  the  more  ob\-ious  tasl<  of  stri\-ing 
to  secure  tliat  as  large  a  portion  of  tlie  difference 
between  the  two  limits  as  possible  should  come 
to  the  wage  earner.  Tlic  distribution  of  this  differ- 
ence depended  not  on  the  strength  of  tlie  limits 
to  fi'-^i'^t  attack,  but  on  strength  of  tlie  barg;iiner; 
and  the  object  of  trade-union  p(dic}-  has  Ixx-n  to 
streiigtlien  tlie  laborer  as  a  bargainer  in  tlie  labor 
marls-et. 

The   laborer,    bargaining  in   his   own   strength,    is 
subject   to  serious  di><il)ililios.      Usuall\-   he  has  no 


266  The  Bargain  Theory  of  Wages. 


reserve  fund   to  enable  him  to  "  stand  out,   as  all 
other  sellers  do,  for  his  price."  ^ 

"  A  landlord,"  says  Adam  Smith,  "  a  farmer,  a  master 
manufacturer,  or  merchant,  though  they  did  not  em])l  n- 
a  single  workman,  could  generally  live  a  year  or  two 
ujjon  tlie  stock  whicli  thcv  have  alreadv  ac(}uired. 
Many  workmen  could  not  subsist  a  week,  few  could 
subsist  a  montli,  and  scarcely  any  a  year  without  em- 
|)lo\-ment.  In  the  long  run  the  workman  may  be  as 
necessary  to  liis  master  as  his  master  is  to  him,  but  the 
necessity  is  not  so  immediate."  f 

It  is  the  immediacy  of  the  necessity  wliich  makes 
all  the  difference  in  the  bargaining.  The  laborer 
must  sell  to-day :  the  employer  need  not  buy  till  to- 
morrow. To  the  master  it  is  only  a  question  of 
profits :  to  the  laborer  it  is  a  cjuestion  of  life.  Trade- 
unions,  with  their  out-of-work  funds,  enable  the 
hdjorer  to  stand  out  for  his  price,  as  other  sellers 
do.  They  practically  endow  the  laborer  with  a  re- 
ser\'e ;  and  thus  enable  hini  to  bargain  with  the  em- 
ployer on  more  equal  terms.  This  is  one  great 
disability  they  remove,  in  part  at  least;  but  it  is  not 
the  greatest  to  which  the  laborer  is  subject.  The 
individual  laborer  is  not  simply  set  over  against  the 
employer.  He  must  sue  for  work  as  one  of  a 
crowd.  When  two  men  run  after  one  boss,  said 
Cobdcn,  wages  fall;  and  the  first  clause  is  more 
often  realized  than  the  second  of  his  much  quoted 

*  Tliorntim,  On  Labor,  bk.  ii.,  c.  i. 
\]Vcalt]i  of  Xatio)is.  p.  23, 


The  Disabilities  of  the  Laborers. 


267 


dictum.  The  l;iborcr  may  be  endowed  with  a  re- 
ser\-e,  and  m,i\-  stand  out  for  his  price,  as  otlier 
sellers  do;  but  the  conq^etition  for  employment  may 
be  so  ^M"e;>t  that  his  [dace  is  fdled  wliiK'  he  stands 
out.  Xo  iniH\d(hial  workman  is  iiuh\pensable. 
In  tlie  loUL^  run,"  to  repeat  the  sentence  from 
.Adam  .Smith,  "  tlie  worlcman  ma\'  be  as  neces>ary 
to  his  master,  as  his  master  is  to  him  ;  but  the  neces- 
sity is  not  so  immediate."  Labor  is  indeed  indis- 
pensal)h',  but  110  inth'\i(hial  is.  1/  11'  y  a  pas  d  '  /loini/ie 
//e'eessair(\  AL'itthew  Arncdd  (as  he  tells  us),  was  fond 
of  (piotiiiL;'  to  the  most  comi)lacent  people;  and  the 
lower  we  l^'o  in  the  ranks  of  industry,  the  truer  the 
doctrine  is.  This  is  the  reason  wh\'  strikes  amon^t^ 
un--killed  kdjorers  are  so  rareU'  siiccessful.  Unskilled 
kd)or  ma\-  be  necessary  and  indispenscdjle ;  but  no 
unskilled  laborer  e\-er  is.  His  place  can  be  too 
easily  tilled  and  Iiis  ser\-ices  as  readily  rendered  by 
anotluM'.  The  object  of  traiie-uiiion  policy,  throu^^h 
all  the  maze  of  conOictin;.;  and  ob-cure  rei;"u lati on  ■ 
has  been  to  L;i\'e  to  each  indi\-idual  worker  some- 
thini^r  of  the  indispensabilit}-  of  lab')r  as  a  vrhole. 
Had  the  unions  power  a.s  th.ey  ha\'e  amk/ition  they 
mii^ht  rule  the  industrial  world.  That  their  [)<)licy 
has  not  effecteil  more  than  it  has  is  due  parti}'  to  the 
small  prriportion  of  the  worlcers  included  within  their 
numbers,  and  partl\-  to  certain  natural  liniitations 
to  their  power.  The\' dndd  not  succeed  in  eni;'ross- 
in;^^  the  wliole  of  the  pi'oduct  of  indM>tr_\-  because  the 
master  is.  in  pi'esent  industrial  condilion-,  as  ncCes- 
sar\'  to  the  laborer  as  labor  is  iiuli-i)ensab!e  to  the 


268  TJie  Bargain  Theory  of  Wages. 


master.  A  large  measure  of  success  in  their  policy 
would  probably  result  in  a  diminution  of  the  de- 
mand for  labor  owing  to  the  conversion  of  circulat- 
ing into  fixed  capital  and  the  adoption  of  labor-saving 
machinery.  There  is  small  risk  of  their  policy  be- 
coming dangerously  successful.  The  natural  limita- 
tions to  the  policy  quickly  check  any  excess  of 
zeal. 

The  province  of  trade-union  action  is  the  strength- 
ening of  the  position  of  the  laborer  as  a  bargainer, 
the  enabling  him,  in  particular,  to  resist  that  pressure 
of  circumstances  of  which  employers  might  be  ready 
to  take  advantage.  In  the  useful  phrase  given  us 
by  Mr.  Sidney  Webb,  the  essence  of  trade-unionism 
is  "  collective  bargaining."  More  or  less  uncon- 
sciously, all  the  regulations  of  the  union  have  this 
in  view;  and  most  of  the  customs  and  prejudices  of 
the  trade-union  world  are  inspired  by  this  idea. 
The  solidarity  of  labor  for  which  they  strive  is  only 
a  means  to  collective  bargaining;  and,  with  this  in 
view,  they  strenuously  oppose  many  reforms  which 
would  probably  secure  great,  though  temporary  ad- 
vantages for  at  least  a  large  number  of  workers. 
They  oppose  any  scheme,  however  enticing  or 
philanthropic,  which  \vould  have  as  one  of  its  re- 
sults the  separation  of  the  indix'idual  workman  from 
his  fellow  workers.  They  will  not  allow  grading  of 
workers  according  to  aljility,  although  the  demon- 
strated result  is  to  make  it  increasingly  difficult  for 
older  men  to  obtain  any  work  when  they  no  longer 
have  the  })hysical  strength  to  earn   the  trade-union 


Collect  i\  V ■  Ban:  a  in  i>i c 


iCx) 


minimum.*  They  oljjcct,  witli  the  success  of  the 
av(^wecl  poHcy  of  tlie  Soutli  Metropohtan  Gas  Com- 
pany before  llieir  e\-es,  to  an\',  and  e\er\',  scheme 
of  profit  sharin:^:  such  schemes,  liowxnx-r  profitable 
tliey  m.i\'  prove  to  tlie  indixichial  workmen,  ha\-in<^, 
as  their  result,  if  not  as  their  moti\'e,  the  detachin<; 
of  a  section  of  workers  from  their  fellows.  They 
are,  with  some  cxcejitions,  opposed  to  piece  work, 
because  it  offers  a  standing  temptation  to  the  indi- 
\"idual  to  set  the  pace  of  work  too  fast  for  his  weaker 
or  less  sk'illed  fellow  workers.  As  a  body,  the}'  will 
n(~)t  hear  of  measures  \\'hich  allow  contractiuLj  out ; 
because  of  the  ine\'itable  effect  on  the  solidarit}'  of 
labor.  Their  aim  is  to  compel  the  emplo_\'ers  to  deal 
with  tlu'ir  men  collecti\'el\".  The  history  of  the 
_f;rowth  of  tlieir  power  is  simpl\'  the  history  of  the 
i^rowiii;,^  ind)lic  and  le_q;al  reco_L;nition  of  their  ri_L;ht 
to  re[)ri'sent  the  collectix'e  interests  of  their  members. 
l''rom  first  to  last,  this  object  has  been  kept  in  \'iew  ; 
aiul  the  object  is  as  iniportant  in  the  present  day  as 
e\'er  it  was.  L)i\'ide  and  L;"o\'ern  has  e\"er  Ijeen  the 
policx"  of  the  mar-ter.  To  treat  w  ith  each  individual 
as  an  indix'idu.d  and  to  ii^-nore  tiie  trade-union  ^\•hich 
claimed  to  represent  him,  has  always  been  the  prac- 
tice; no\\-  it  is  also  the  a\"o\\X'il  polic\".  Masters' 
associations   ha\'e   been    formed   to    fiL;ht    the   trade- 

*  Tl'.L-  Halifax  (Xo\a  ScHia)  ship\\:-i.;lits  and  Caulkers  As-c  .rialinn 
alK'W  nu'ii  n\-cr  >i\;y  to  work  in  tin-  U'a'lc  for  wlial  t!i'_'}-  please-.  If 
an  in'li\i'!inl.  lM\w\-cr,  clioo'-o  to  nina.in  in  tho  sorir;\-  alter  hv  Inis 
rcarliC'l  --ixtv  y.-ar-.  Ik-  i-  MiLicot  to  tlic  u-iiai  iu-naii\-  if  he  aceept>lL.ss 
than  the  I'lKon  \''.\.  S--^"  a  il.w.  lio\;'il  l 'on;n!i-s;>  ai  ii  aaunhl'  on 
the  Relati'>n>  of  ('api;jl  and  Lahor,  Nova  Scotia  t'.\  i'lencc,  p.   loS. 


270  TJic  Bargain  Theory  of  Wages. 


unions  with  their  own  weapons.  The  employers 
maintain,  exclusively  for  their  own  purposes,  as  they 
avow,  Associations  of  Free  Laborers,  so  called^  al- 
though the  government  and  management  are  car- 
ried on  by,  and  for  the  interest  of,  persons  who  are 
not  members.  These  associations  are  designed  to 
permit  the  masters  to  treat  with  all  workmen  as  in- 
dividuals, in  contempt  of  the  unions. 

The  trade-unions  have  not,  so  far,  been  very  suc- 
cessful in  carrying  out  their  policy.  After  nearly 
three  quarters  of  a  century  of  agitation,  the  English 
unions  secured  a  modified  recognition  of  their  posi- 
tion. The  right  to  combine  was  admitted,  and  legal 
protection  against  their  own  officers  was  accorded ; 
but  little  else  has  been  gained.  Public  opinion, 
occasionally  and  spasmodically,  allows  the  right  of 
the  unions  to  treat  for  the  men.  Here  and  there,  a 
more  enlightened  employer  has  recogni/.ed  that  it  is 
better  to  deal  with  a  strong  union  than  with  indi- 
\-idual  workmen;  but  as  yet  the  unions  have  not 
won  any  legal  loens  standi  as  the  representatives  of 
their  members.  It  is  still  held  in  law  that  there  is 
a  separate  contract  between  the  employer  and  each 
of  his  em})loyces.  Tlie  union  may  order  a  strike; 
but  before  tlic  strike  begins  each  indix'idual  employee 
must  give  separate  notice  of  the  termination  of  his 
indi\-idual  contract.  The  union  is  n.ot  competent  to 
give  legal  notice  for  its  members;  and  a  collective 
strike  may  I(.\gally  talce  place  only  after  indix'idual  no- 
lice  has  been  gi\'cn.  To  obtain  this  legal  position,  as 
the  rei)resentatives  of  the  members,  the  trade-union 


TJtc  Mcuibirsliip  of  tJic  Unions.  271 

leaders  are  slill  stiix'iii^;  aiul  until  this  recognition 
is  obtained,  coIKetixe  l)ar_L;"aininL;'  will  not  l)ccr)nie, 
even  between  the  limits,  a  complete  determinant  of 
wai^^cs. 

The  reason  \vh\-  this  lej^al  recoj^niition  has  not  been 
obtained  is  that  the  ti'ade-uni<^nists  do  not,  in  many 
trades,  form  a  larL;e  proportion  of  the  workers."" 
There  is  a  natural  hesitation  in  committing;  to  a 
fractional  pn^portion  the  rei^ulation  of  the  whole  of 
industr)-.  It  is  not,  however,  necessary  for  the 
practical  success  of  the  polic}'  of  collecti\'e  bart^ain- 
ini;  that  the  whole  of  labor  should  be  inchuletl  within 
the  unions;  and  hitherto  the  union  policy  has  been 
more  successful  than  the  membership  seems  to  have 
warranted.  This  is  possibly  due  in  part  to  the  fact 
that  the  meml)crshij)  has  been  made  up  from  the 
best  \\'(^rkmen  in  the  trades,  \\\\o  mii^ht,  in  an}'  case, 
ha\'e  obtained  the  rise  of  wag^es  which  the\'  disinter- 
estedl)-  attribute  to  the  union  })olicy;  and,  partl\-, 
also,  to  the  fact  that  the  full  strength  of  trades- 
uni(Miism  is  not,  at  most  times,  ade(piatel\-  repre- 
sented 1)\-  numbers.  The  membership  \-aries  a  great 
deal  accoi'ding  to  the  necessities  of  the  industrial 
world.  In  times  of  peace  and  prosperity,  the 
meml")ershij)  will  hardlx'  maintain  itself  at  fighting 
strength.  In  times  of  threatening  it  recei\'es  large 
accessions.  There  seems  to  be  a  kind  of  nucleus 
of  the   hd)or  army  continiiall)'  undei'  arm-,  while  the 

*  AcCi  ir^liiiL;  to  Mr,  l^'rcilcrii  k  W'ickj,  [  Xiiti'tc-riitli  Criiturv,  iSiji) 
alii'Ut  M  \"jr  LXiit.  nf  tlic  \\".i:kiiiL;  males  over  twenty  in  the  United 
Kin^'iliiin  are  enr^lle'l  in  the  uniuns. 


2/2  TJic  Bargain  TJicory  of  Wages. 


large  part  of  its  fighting  strength  is  in  reserve  and 
does  not  remain  with  the  colors.  This  reserve  is 
not  so  effective  as  the  stalwarts  who  remain  all  the 
time  under  arms  but  it  has  its  effect  in  maintaining 
a  large  degree  of  solidarity  and  in  giving  greater 
authority  to  the  demands  made  by  the  standing 
army.  The  knowledge  that  danger  brings  out  the 
reserve  checks  aggression  which  apparent  numerical 
weakness  invites. 

At  the  same  time,  this  habit  of  irregular  service  is 
almost  necessarily  fatal  to  discipline,  and  shuts  out 
the  hope  of  complete  success.  Effective  collective 
bargaining  depends  even  more  on  discipline  and 
cohesion  than  on  numbers.  The  unions  arc,  there- 
fore, faced  with  a  twofold  difficulty,  and,  conse- 
quently, a  twofold  task.  They  cannot  hope  to 
obtain  recognition  from  cmplo\'ers  as  the  represen- 
tatives of  the  emplo}-ees,  while  the\'  fail  to  retain 
their  hold  on  their  own  members.  The  very  possi- 
bility that  an  agreement  with  the  union  may  be 
repudiated  by  the  workers  outside  the  councils  of 
the  union  is  sufficient  to  prevent  an}-  important 
agreements  froni  e\"cr  being  made.  Until  the  unions 
secure  the  adhesion  of  their  own  lukewarm  sympa- 
thizers and  the  implicit  acceptance  of  the  collective 
decisions  by  every  member,  whether  consulted  or 
not,  they  \\\\\  gain  only  a  grudging,  or,  at  most, 
a  sentimental  recognition  from  a  few  employers. 
Their  main  task,  as  it  is  the  chief  olistacle  in  the  wa\' 
of  success,  is  to  make  their  internal  tliscipline  more 
perfect   and  to  strengthen   their  hold  on   their  own 


Discipli)ic  tJic  Prohliiii  for  Trndcs-U)iions.     273 


members.  The  (lifficult}-  is  ;^reater  in  i)eace  than 
in  war.  W'hiK.'  a  strike  is  impendinc;  and  tluriiiL;'  its 
continuance  a  union  has  Httle  cHfficult}-  in  control- 
lini;'  its  own  members.  Durini;  peace  it  is  harder  to 
con\  ince  unenH^htenetl  members  that  tlie  benefits 
of  concerted  action  and  colIecti\e  bar_i;aininc,r  out- 
weiL^h  the  sjicrifices  which  must  be  made  to  obtain 
these  benefits.  Caprice  and  lukewai'miiess  ahke  tend 
to  reduce  the  membersliip  wlien  nothing;  calks  forth 
the  spirit  of  ckiss  antat^'onism.  Consecpiently,  it  is 
not  merely  as  a  remeily  ai^ainst  tlie  masters,  but  also 
as  a  remedy  ai;'ainst  the  indifference  of  their  own 
members  and  the  lack  of  habits  of  discii)line,  that 
newly  formed  unions  find  themseh'es  compelled  to 
carr\-  on  a  militant  polic\-  and  eni;'age  in  strikes.  In 
older  unions,  amon<^-  whose  members  the  habit  of 
obedience  has  been  formed,  there  is  not  the  same 
necessity  for  a  perpetually  militant  policy.  Their 
pro\-ed  streiiL^th  has  not  only  won  them  the  respect 
of  the  employers  but  has  also  secured  cohesion  in 
their  «n\ii  ranks. 

The  difficult}-  of  securinrr  this  cohesion  arises 
from  the  fact  that  the  (^nly  power  which  a  union 
can  exercise  o\'er  its  members  is  a  moral  power. 
It  de[)ends  on  their  w  illini;ness  to  make  pres- 
ent sacrifices  for  future  l)enefits.  I-'\'en  where 
habit  has  reinf<M"ced  the  orii;inal  UKn'al  m()ti\'e  the 
C(^ntrol  of  the  membL'i's  duianL;'  times  of  peace  is  a 
serious  ([ue-^tion.  ^biiu'  of  tlK'ir  rules  and  regula- 
tions are  more  honoi-ed  in  the  bi-each  than  in  the 
obserwmce;  and   most   unions  ha\"e  been  compelled 


274  ^/''<^'  Bargain  TJicory  of  Wages. 


to  reinforce  their  authority  by  more  mechanical 
methods  than  an  appeal  to  principle  or  future  self- 
interest.  With  the  exception  of  the  militant  new 
unions,  nearly  every  association  exercises  the  func- 
tion of  a  benefit  society,  and  by  means  of  deferred 
payment  endeavors  to  retain  control  of  its  members. 
The  means  which  they  object  to  the  employer  us- 
ing in  order  to  attach  the  men  to  his  service  they 
themselves  employ  in  order  to  maintain  the  solid- 
arity of  labor.  These  benefit  funds  were  originally 
established  purel}-  as  benefit  funds,  but  now  they 
are  made  to  serve  a  double  purpose.  It  may  seem 
strange  that  members  of  a  voluntary  association 
founded  to  secure  the  interests  of  its  own  members 
should  be  so  dif^cult  to  manage;  and  some  have  not 
hesitated  to  write  strongly  of  trade-union  tyranny. 
It  is  asserted  that  coercion  of  some  sort  must  be 
used  to  induce  those  members  to  join  who  are  so 
hard  to  retain  and  so  difficult  to  manage.  Sureh', 
however,  the  divergence  between  collective  and  in- 
di\'idual  interests  is  no  uncommon  political  plienom- 
enon.  E\"ery  day  collectix'e  decisions  are  being  made 
b\'  m>en  who  know  that  personal!},'  they  will  not  abide 
by  these  decisions.  E\'eryone  who  has  li\'ed  in  a 
prohibition  town  knows  men,  saloon  kee})ers  e\'en, 
^\•h(),  ha\-ing  \-oted  for  "  no  license."  not  only  wink 
at  the  \'iolation  of  the  law  but  often  violate  it  them- 
seh'cs.  It  is  a  weakness  by  no  means  confined 
to  the  working  classes  that  their  immediate  inter- 
ests weigh  hca\'ier  with  them  than  their  collec- 
ti\'e  decisions.      Mow  easy  a  matter  is  it  to  induce 


The  Obstacles  in  ihc  i^'ay  of  Dicipluic. 


'5 


the  shopkeepers  in  one  district  to  stick  b\'  an  caiiy- 
ck)sin_L;  a;j,"reenient  ?  Has  not  tlic  rini;'  or  the  cor- 
ner Uc\ck>ped  under  pressure  of  the  same  tliftlcuh}' 
into  the  combine  and  tlie  trust  ?  Maii\'  an  ardent 
ad\-ocate  of  hi_i;"h  protection  has,  without  mucli  hesi- 
tation. th)ne  a  httle  snui_L;"L;lin;-;"  on  his  own  account; 
with  k'ss  justification,  too,  for  his  incoiisistenc}', 
than  the  trade-unionist  has  for  his,  who,  after  Notin;^ 
for  a  j^xMU'ral  strike  i^oes  l)ack  to  work  whik'  liis  fek 
k)ws  remain  out,  or,  afterak)ni(  experience  of  beiiiL;' 
out  of  work,  undersells  his  fenow-\\()rkers,  akJiouL,di 
he  has  pre\'iously  ac([uiesce(k  at  least,  in  the  prin- 
ciple of  the  trade-imion  mininumi  wai^e.  It  is  not 
trade-union  tx'ranny  which  la_\-s  down  these  reL,'ula- 
tions  but  human  nature  which  necessitates  them. 
l'\>r  the  laborer  must  li\'e  b\-  his  own  labor;  and 
\\lien  there  are  aikled  the  necessities  of  his  wife  and 
childi'en,  it  is  small  wonder  that  he  is  sometimes  false 
to  his  unioni>t  principles.  Without  injustice  to  the 
sex,  when  we  remember  how  much  more  to  a  ^\■oman 
is  the  econoni}-  of  her  own  household  than  the  collec- 
ti\'e  intc'rests  of  labor  can  e\'er  l:)e,  we  ma\'  say  that 
the  wi)men  are  a  most  ])otent  cause  \\\\\  trade-union 
policN"  is  not  more  successful.  When,  in  a  Ioul;  spell 
of  forced  idlcTiess  on  the  part  of  the  breadwinner, 
anicle  after  article  of  furniture  disappears  from  the 
home,  to  bu)-  the  chiMrcu  bread,  it  is  nati:ral  that 
the  wife  shoukj  urL;\'  hei'  hu->band  to  saci'itice  what 
is  to  hei'  onl\-  a  half  intelliL;ible  pi'inciple.  Women 
li\-e  mo!"e  in  the  concrete  than  men.  and  haw  less 
power    of    realiziuL;"   an    ak'stract    principle.       Conse- 


276  TJie  Bargain  TJicory  of  Wages. 


quently,  the  influence  of  the  women  must  be 
counted  as,  on  the  whole,  one  of  the  influences 
hostile  to  the  success  of  trade-unionism.  Their  in- 
fluence reinforces  the  individual  interests  which  it  is 
the  policy  of  the  union  to  subordinate.  However 
much  sympathy  leaders  of  the  union  may  have  with 
the  individual's  position  they  must  set  their  faces 
against  any  pursuit  of  self-interest  which  might 
weaken  his  allegiance  to  union  principles.  It  is 
because  trade-unionists  believe  that  the  interests  of 
the  individual  worker  are  best  guarded  and  main- 
tained by  concerted  action  that  the  policy  of  collec- 
tive bargaining  has  been  adopted;  and  collective 
bargaining  is  not  t\'ranny  but  democratic  principle. 

The  difficulty  of  maintaining  cohesion  and  disci- 
pline is  the  great  natural  limitation  on  the  action  of 
trades-unions  in  raising  wages.  It  is  a  permanent 
limitation  because  it  arises  from  the  inherent  im- 
perfections of  human  nature  and  will  remain  until 
man  is  perfecth'  socialized  in  his  motives  as  well  as 
in  his  outward  actions.  It  arises  not  so  much  from 
the  small  proporti<Mi  of  workers  included  within  the 
unions  as  from  the  conflict  of  individual  and  collec- 
ti\"e  interests;  a  conflict  which,  in  the  nature  of 
things,  is  probably  ine\'itable.  The  difficulty  may, 
it  is  true,  !:>}•  means  of  out-of-work  funds  and  strike 
benefits,  be  met  and  partial!}-  o\-ercome  ;  but,  ^vhile 
the  necessity  for  trade-unions  continues,  this  diffi- 
culty will  confront  them  in  carr\-ingout  their  policy. 

The  proportion  of  the  actual  workers  included 
within  the  union  becomes  of  more  pressing  import- 


The  Cardi)ial  Maxiui  of  Tradc-Vnio)i  Policy.     277 

aiicc  wlun  lliu  wisdom  of  any  particular  application 
of  the  i)riiiciplc  is  under  consideration.  The  utmost 
that  the  fullest  ap[)lication  of  the  principle  could 
achieve  for  the  laborer  is  that  the  actual  value  of 
labor  should  be  determined  as  nearl\-  as  pcjssible  to 
I2.\',  the  up[)er  limit.  Trade-union  action  would  be 
suicidal  if  it  demaiuled  more  of  the  product  in  wai^^es 
tluui  the  industi'}'  can  economicalK'  afford.  It  ma)' 
tr\-  to  secure  that  the  \\hole  of  the  debatable  f^^round 
is  secured  for  labor;  but  it  is  practical  wisdom  to 
recoL^ni/.e  that  the  whole  of  this  <^M'ound  can  never 
be  secured  at  a  stroke.  Ju'sfi/ia  Iciite  must  be  the 
motto  of  the  union  leader  unless  success  is  to  be  im- 
mediate]}" rexersed  ;  and  ad\'ance  can  be  made  only 
by  stai^es. 

The  weakness  of  the  position  of  the  employer  as 
a  bary;ainer  in  the  labor  market  is  that  dela\'  means 
loss  of  profits.  He  can.  it  is  true,  support  himself 
out  of  the  stock  which  he  has  alreatly  ac([uired  ;  but 
he  is  ne\-er  willini;^  to  do  so  if  he  can  ax'oid  it.  The 
i;'reater  the  amount  of  capital  in\'ol\'ed  in  his  busi- 
ness, the  i;'reater  the  loss  arising  from  delay  in  pro- 
cess <^f  production.  The  employer  ma\'  therefore 
be  willing;'  to  _L,n'ant  a  demand  which  is  onl\-  tritlini; 
in  itsi'lf  to  avoid  a  g'reater  loss  b\'  dela\-.  If  the  de- 
mand is  put  forward  in  such  a  wa\"  that  it  aku'm^  Inm 
with  the  j)i'iK-pect  of  further  demands  to  be  made, 
he  ma\'  decitle  to  resist  before  the  opposing:;  forces 
are  tlu-hed  with  success.  So  it  is  the  cardinal 
maxim  of  wisi,'  trade-um'oii  policv  nex'er  to  make 
extra\a'Mnt   demands,  or  to  ask  more  than  the  em- 


278  TJie  Bargain  Theory  of  Wages. 


ployer  will  grant  rather  than  face  the  loss  from  re- 
fusing. If  he  does  refuse,  there  is  certain  loss  to 
him — not,  perhaps,  the  great  loss  of  having  all  his 
capital  made  idle,  but  certainly  the  loss  which  arises 
from  the  necessity  of  making  a  change  in  his  staff  of 
workers  and  in  getting  them  trained  to  his  methods. 
Never  to  press  for  a  larger  gain  than  is  covered  by 
the  difificulty  of  replacing  the  body  of  present  em- 
ployees by  outside  labor,"  '-  is  the  maxim  of  a  wise 
policy.  It  is  a  wise  policy  not  only  because  it  is 
likely  to  be  successful,  but  also  because  it  does  not 
expose  the  laborer  to  any  unnecessary  risks.  The 
laborer  must  live  by  his  labor;  and  if  by  grasping  at 
a  greater  gain  he  sacrifices  the  employment  he  has, 
his  condition  is  both  hard  and  ridiculous.  What 
demand  the  cost  of  replacing  the  present  staff  by 
outside  labor  ma}'  admit,  depends  on  the  supply  of 
labor,  the  strength  of  the  union,  and  the  nature  of 
the  work.  If  a  large  proportion  of  the  workers 
is  included  within  the  union  they  may  press  for  a 
larger  gain  because  the  difficulty  of  replacing  the 
body  of  the  present  workers  may  be  so  great  that 
the  employer  must  either  submit  to  the  demand  or, 
refusing,  submit  to  have  his  works  closed  down.  In 
the  skilled  trades,  where  a  considerable  proportion 
of  the  workers  is  included  within  the  union,  a  de- 
mand, within  the  proper  limits,  will  generally  be 
granted  unless  it  happens,  as  it  may  \-er\-  probably, 
that  the  strength  of  the  workers  has  already  secured 
for  them   all  the  difference  between   the  two  esti- 

*  Jlobson,  Frolile>iis  of  Poverty,  p.  n6. 


The  liljcct  of  Trade- i'liions  on  Wages.        279 


mates.  Ill  ihc  case  of  unskilled  workers,  demands 
must  be  \"er}-  much  more  mcjderate,  because  the  cost 
of  replacing'  is  S(j  much  less. 

The  advocates  of  trade-unions  claim  that  the 
greater  part  of  tiie  rise  of  wages  during  the  last  half 
centui)'  has  been  due  to  their  intluence.  Certainly 
the  rise  of  \\ages  antl  the  growth  and  progress  of 
ti'ade-unionism  ha\'e  pi^oceeded/'^?;'/ /c^v.sv/.  The  ex- 
amination we  ha\e  maile  of  the  influence  of  collective 
bargaining  shows  that  the  claim  must  be  modified. 
Had  the  standard  of  elTiciency  not  risen  steadily, 
there  would  luu'e  been  no  steady  rise  of  wages,  un- 
less, indeed,  we  are  to  suppose  that  the  difference 
between  the  two  limits,  at  the  beginning  of  the 
l)eriod,  \\"as  enormous:  which  we  luu'c  no  ground 
f(M-  supposing.  Indirectly,  as  we  saw,  trade-union- 
ism has  promoted  efficiency  and,  indirectlw  has 
thus  raised  the  U[)per  limit  of  wages.  Directlx", 
h()wc\'er,  the  method  of  colk'ctix'e  bargaining  can 
secure  onl\-  that  the  \-alue  of  labor  is  determined 
nearer  the  u[)[)er  limit  than  the  lower;  and,  had 
there  been  no  rise  in  the  standard  of  elTicienc}', 
there  would,  \-er\-  ([uic]<l}-,  ha\-e  been  a  limit  to  the 
rise  of  wages. 

When  we  regard  the  polic\'  of  trade-unioni.-<m  I'e- 
g.u'ding  wages  as  being  tlii-ccted  towards  the  cojlcc- 
ti\-e  interc>ts  of  the  workers  the  balance  sheet  of  a 
sti'ike  beconu.'s  of  secondar\'  importance.  lo  the 
indixa'dual  sti'iker,  the  result  ma\-  l)e  a  great  loss:  to 
the  whole  l)od\"  of  work'ers  it  ma\'  be  a  gi'eat  gain. 
W'e  can   no   more  estimate  the  wisdom   of  a  sti'ike 


28o 


The  Bargain  Theory  of  Wages. 


from  the  point  of  view  of  the  actural  loss  or  gain  to 
the  strikers,  than  we  can  estimate  the  results  of  a 
battle  or  a  campaign  by  the  number  of  lives  lost.* 
Even  a  virtual  defeat  when  the  strikers,  or  so  many 
of  them  as  can  find  room,  go  back  to  work,  with 
their  demands  ungranted,  may  result  in  a  great  gain 
to  the  body  of  workers  as  a  whole — to  the  body  of 
workers  in  that  trade  directly  and  in  a  greater  meas- 
ure, but  also,  though  indirectly,  to  the  workers  in 
all  trades;  and  an  advance  which  was  refused,  when 
thus  violently  demanded,  may  be  conceded  by  de- 
grees when  more  cautiously  requested — and  not  to 
the  strikers  only  —  because  the  employers  have 
learned  to  respect  the  fighting  power  of  their 
employees. 

*  Marshall  :  Economics  of  Industry,  p.  391  ;  iiee  also  Nicholson's 
Strikes  and  Social  Problems. 


CHAPTER   VIII. 

THE    METHODS   OF    1X1  )l  S  TRIAl.   REMUNERATION 
AS    A    \VA(;ES    FACTOR. 


M' 


R.    sen  LOSS,    in   his   Methods   of  Industrial 

RciinDicratioii,  has  Cf^nfiiiL'd  his  iiwcstii^ation 
to  the  method  as  cHstinL;uished  from  the  amount  of 
the  remuneration;  but  the  method  is  not  without 
l.)earinL;'  nn  the  more  e^^ential  ([u  est  ion  (.)f  the  amount. 
The  system  ach^pted  ma\'  Ije  of  such  a  natui'c  as 
matericdU'  to  affect  tlie  position  of  the  \va_L;e  earner 
in  the  \\a<^"es  barL^'ainiiiL^ :  his  freedom  ma\'  be  cur- 
tailed, liis  i^eneral  character  \\'eakened,  his  efhciency 
rechiced,  1)\'  (jne  method  of  remunerati<)n  ;  while  b\' 
another  his  mobilit\-  and  his  independence  may  be 
increased,  the  stronger  elements  in  his  character 
allowed  to  de\"elop,  and  the  utilitx'  ot  the  reward, 
for  which  he  is  induced  to  serx'C,  auL;inented. 

The  form  of  the  waives  contract  w  hicli  is  made  at 
the  conclusion  of  the  bari^aininL;'  has,  ther^'fore, 
sufficient  imjiortance  to  justif\'  separate  tri'atment; 
e\'en  akhou;_;h  the  met]iod>  of  remuneration  are  not 
to  be  reL;arded  as  .ui  indepe-ndent    factor  in  the  pro- 

2-51 


282  TIic  Bargain  TJicory  of  Wages. 


cess  but  simply  as  a  general  condition  affecting  the 
factors  which  have  already  at  greater  or  less  length 
been  discussed.  This  chapter  is,  therefore,  an  ex- 
amination of  the  way  in  which  the  manner  of 
payment  affects  the  mobility  of  the  laborer,  the 
possibility  of  combination,  the  efficiency,  the  dis- 
utility, etc.,  of  labor;  and  may  be  regarded  as  a 
supplement  of  or  api)endix  to  the  previous  chapters. 

The  time  and  the  manner  and  the  kind  of  re- 
muneration which  the  laborer  receives  determine  in 
part  the  laborer's  estimate  of  what  the  labor  he  ren- 
ders is  worth  and  the  employer's  estimate  of  what 
the  laborer's  work  is  worth  in  the  market;  and 
affect  strongly  the  comparative  strength  of  the  bar- 
gainers in  the  process  of  bargaining. 

The  laborer's  estimate  of  what  his  labor  is  worth 
— the  lower  limit  of  wages — is  partly  conditioned  by 
the  methods  of  remuneration  which  may  either  in- 
crease or  diminish  the  disutility  of  labor,  or  increase 
or  diminish  the  utility  of  the  reward.  The  former 
is  not  directly  or  greatly  affected.  Indirectly,  by 
weakening  the  laborer's  power  of  resistance,  certain 
forms  of  payment,  notably  truck  payments,  lead  to 
evil  conditir)ns  which  materially  increase  the  dis- 
utilities; and  generally  speaking  those  forms  of 
wages-contract  which  leave  some  element  indefinite, 
intensify  both  the  positive  and  negative  disutilities. 

Profit  sharing,  as  we  have  seen,  has  the  effect 
of  increasing  the  labor  expended  without  i)rop()r- 
tionally  increasing  the  reward  ;  and  piece  work,  by 
forcing   the   pace   and   ])aying  all   according  to   the 


I'-fJ'i'ct  on  the  Disiitiiify  of  Labor 


283 


staiuhuxl  of  the  most  efficient,  has  tlic  same  effect." 
The  objections  which  the  trades-unions  raise  a_L,Minst 
the  system  of  piece  work  are  not  b.ised  on  any  en- 
X'ions  L^rudL^'e  of  a  hiL;her  reward  for  hiL;"lier  efllcieiicy, 
but  on  the  fear  that  the  sui)erior  abilit)-  of  a  few  may 
be  set  as  tile  stanchird  for  alL  Time  waives  have 
nearl)-  alwa\"s  a  (|uantitative  reference  and  in  the 
ethical  [)hrase  are  sanctioned  1)\'  the  dismissal  of  all 
wlu~)  fail  to  reach  the  standard.  This  standard  tends 
to  be  the  elficieiic}'  of  the  best  workers  on  piece 
work  ;  and  the  conse([uence  of  enforcin_q,'  this  standard 
would  be  that  for  a  gix'en  reward  a  ^'reater  expendi- 
ture of  eiierL;"}-  is  required. 

The  moral  disutilities  of  labor  are  L;x'nerall\'  in- 
creased b}-  those  forms  of  wai;e  i)a\-ment  where  the 
laborer  is  not  left  in  free  and  com[)lete  command  of 
his  reward.  These  intensif\-  the  ii'ksomeness  of  Iab(:)r 
and  the  sense  of  dei)endence;  and,  consecpienth', 
nu'an  a  lari^er  output  of  eneri;'}'  and  a  i;'reater  t;'en- 
eral  disutilit}'. 

The  intluence  of  the  methods  of  remuneration  011 
the  other  element  wdiich  Li,'oes  to  make  the  lab()rer's 
estimate — the  utility  of  the  reward — is  more  direct. 
\\'a!4'es  are  earned  in  oriler  to  be  consumed  and  the 
method  of  pa\'ment  ob\'iously  affects  the  commaiid 
the  laborer  has  over  consumption  t;"oods.      The  maxi- 

*  Piece  \\-ork  li  i>  undiiulitciUy  the  effect  of  iiicrea^iiiL;  the  output  of 
the  worker  kut  it  h;i.i  had  no  iii;luence  in  rai--ii'.L;  the  averiL^e  \v:iL^e  of 
the  piece  wori^eis  above  tliat  of  the  time  woi-kers.  The  a\"ei"aL;e 
annual  time  waL^e>  in  the  I'nited  Slates  is  >4i)S — tlie  averai^'e  annua! 
piece  wai^e  i>  ij^soo.  Wright,  lud'As'.rial  l-.volution  oj  United  SldttS, 
p.  197. 


284  TJie  Bargain  Theory  of  Wages. 


mum  utility  is  obtained  by  the  laborer  when  his 
wages  are  paid,  at  short  intervals,  and  in  the  legal 
tender  of  the  country.  Whether  he  obtains  an  ethi- 
cal maximum  depends  entirely  upon  himself  and  his 
discretion  in  consumption.  He  certainly  obtains 
the  fullest  possible  opportunity.  The  minimum  of 
utility  is  in  general  obtained  when  the  wages  are 
paid  in  goods,  or  in  orders  at  the  store  only,  or  at 
long  and  irregular  intervals.  There  are  two  cases  to 
discuss  (i)  when  wages  are  paid  in  cash  but  at  long 
intervals  or  irregularly;  and  (2)  when  they  are  paid 
in  kind  or  in  goods,  whether  b}-  the  week,  the  month, 
or  the  season. 

In  the  industrial  centres  wages  are  now  generally 
paid  by  the  week;  but  in  many  districts  where 
money  is  scarce,  or  labor  unorganized,  and  in  cer- 
tain emplo}-ments  where  the  natural  conditions  do 
not  favor  weekly  payments — e.  g.,  railroads — wages 
arc  still  paid  by  the  fortnight  or  the  month.  There 
can  hardly  be  any  c|ucsti()n  that  weekly  pa\'ments 
are  a  benefit  to  the  laborer.  On  this  score  his  own 
demand  ma}'  be  taken  as  final;  and  there  is  practical 
unruiimity  among  the  working  classes  in  regarding 
weekly  payments  as  an  advantage.  They  are  en- 
abled thus  to  avoid  the  increased  prices  which  are 
charged  when  credit  is  given  :  and  although,  in  a  few 
instances,  it  may  be  that  the  laborer.  pa\-ing  cash, 
is  unable  to  obtain  a  discount  from  credit  prices,  and 
may  thus  be  made  to  make  up  to  the  storekeeper  for 
the  bad  debts  of  his  credit  customers,  such  instances 
are  rare  and  occur  chicHN-  in  smaller  towns  and  \il- 


Effect  on  tlic  Utility  of  the  Rez.'ard.  2S5 


lages.  Evidence  was  taken  by  the  Canadian  Labor 
Conimissiijn  on  this  subject  and  the  opinion  of 
working-class  witnesses  was  that  with  weekly  cash 
payments  they  could  s],)end  their  money  twenty  to 
twent\--fi\-e  per  cent,  better  than  if,  in  consecpience 
of  monthly  pa\-ments,  the\'  were  compelled  to  buy 
on  credit.  On  the  (jther  hand,  the  employers  who 
still  maintained  the  practice  of  monthh'  pa\'ments 
a\-erred  that  weekly  pa\-ments  led  to  extra\-a<;ance 
and  dissi[)ation  while  monthl\'  pa\-ments  encourai^ed 
savini:^  and  enabled  the  worker  more  easily  to  meet 
an\-  large  liability  —^r.  o^.,  house  rent — he  might  be 
required  to  pa}'.  To  the  be>t  workmen  wcekl}'  pa\'- 
ments  might  be  no  great  advantage,  and  to  the  dis- 
si[)ated  the}-  would  prove  a  great  e\-il ;  but  to  the 
a\-erage  workmen  the}'  would  be  highly  advan- 
tageous." 

*  Oi!'.:rto  l-'.iiiL,  \).  -175,  Can.  Lalxir  Com.  "  Tlie  emijloyccs 
wiiiiM  ratliLT  ha\e  their  pay  weekly.  I'erause  it  uduM  make  tliem 
tin.uuially  in<irc  indepemleiit.  We  lind  that  in  a  great  man\'  in- 
stances (witness  was  1  )istriet  Master  of  the  Knii^lUs  of  l.ahori  work- 
men have  to  run  monthly  aecounts.  and  tliat  puts  them  entirely  at 
the  mercy  of  the  corner  i^mcers.  Vou  feel  under  oldiL^ation  to  the 
man  ;  you  have  tn  take  wlia;  he  hast^ot  and  \(iu  cann.it  i;o  anywhere 
else  ;   you  ai'e  ohlii^ed  to  stay  tliere.  ' 

.\\'z\!  S.-,>//,i  /■'.:■! ii.-?u-i\  p.  yy\.  "  I'he  men  could  li\-e  for  from  live 
to  eiL;ht  d.oUars  a  mmitli  le-s  for  cash,  if  they  h.id  it,  than  they  can 
upon  ux-dit.  .  .  .  When  you  have  ca-h  tlie  merchant  v.ill  take 
u  I'.at  ymi  L;ive  him,  w  lier' as,  if  \(iu  L;et  l^oihI-,  ,in  credit  thev  ;;o  into 
hi^  k.:nks  at  his  nwn  liguio." 

/ti  :..  p,  4(1.  "  It  v.'culd  i;i'.e  tlie  men  a  much  better  chance  to 
dir, il  f>'i-  c.ish.  and  wirjld  ^ive  lhi,in  ,i  cha::cc  t<>  buy  mai)\-  thinL;s 
cheiper  than  they  can  d^i  li_\-  the  pi-e-ent  ^N-tein  'if  m^aithly  payments. 
If  a  ni.in  t'ltues  in  with  ciai-iry  pr^  die  e  :o;d   y:  m  a:e  pail  weekly  or 


286  The  Bargain  Theory  of  Wages. 


Not  infrequently  the  payment  of  wages  is  not 
made  for  some  weeks  after  the  time  sheet  has  been 
made  up  and  the  workmen  get  advances  at  high 
rates  from  outsiders  on  this  security.  Sometimes 
the  employer  pays  wages  in  due-bills  payable  at 
some  future  date;  and  the  wage  earner  may  either 
wait  or  get  them  discounted.  The  rates  of  discount 
on  such  due-bills  are  generally  high  not  only  because 
the  security  may  not  be  good,  but  also  because  the 
necessities  of  the  worker  are  immediate.  One  wit- 
ness testified  before  the  Canadian  Labor  Commis- 
sion "'■•   that  he  had  been  paid  with  bois  or  due-bills 

fortnightly  you  have  cash.  If  you  have  not,  he  goes  to  tlie  store  and 
sells  what  he  has,  and  you  have  to  buy  the  same  article  on  credit  and 
pay  more  for  it." 

Ibid.,  p.  405.  "  In  reference  to  the  subject  of  weekly  payments 
.  the  only  difference  is  that  the  men  go  drunk  once  a  week 
instead  of  once  a  fortnight." 

*  Quebec  Ezichnce,  p.  7S3.— We  were  obliged  to  take  '  bo>!s,'  notes 
to  be  paid  ;  without  these  we  might  have  waited  a  long  while  and 
pcrha]:>s  lost  our  money. 

It  was  an  order,  a  note  to  be  changed,  a  jiromissory  note  :  "  I  pro- 
mise to  ]-)ay  in  thirty  days  the  sum  of 

().   What  did  you  do  with  that  note?     -V.    I  got  it  changed. 

Q.  Did  it  cost  you  anything  ?  A.  One  dollar  and  the  note  was  for 
twenty. 

Q.  Did  you  change  it  in  a  bank  or  with  somebody  in  connection 
with  your  master?     A.   With  a  broker. 

Q.  Ditl  your  master  send  yu  there  or  did  you  go  of  your  own  ac- 
cord?    A.    My  master  told  me  to  go  there. 

O.  Then  the  master  gave  you  a  note  of  twenty  dollars  to  jiay  your 
wages,  and  sent  you  to  the  broker  he  pointed  out  who  jiaid  you  the 
note  and  retained  the  dollar?     A.   ^  cs. 

The  only  industry  in  which  tliis  jmictice  still  survives  to  any  extent 
is  lumlicring  wdiere  a  considerable  interval  of  tiuie  must  elapse  betw-een 


Deferred  Payment. 


287 


which  were  discounted  at  sixt\'  per  cent.  Several 
Ontario  witnesses  stated  that  the\-  hail  been  paid  in 
due  bills  which  were  discounted  i)y  local  shop- 
keepers at  fifteen,  twent\--fu-e,  and  e\-en  fift}'  per 
cent.  ;  although  some  merchants  in  Ottawa  were 
said  to  receixe  them  at  face  \alue.'" 

The  manner  of  pa}-ment  here  not  only  restricts 
the  command  which  the  laborer  would  (Otherwise 
ha\'e  o\-er  the  necessaries  of  life  but  actually  re- 
duces the  nominal  wa^es  paid. 

Pa\-ment  of  ^vaL;es  in  kind  ma\'  be  either  produce 
waives  or  truck  waives.  For  the  former  there  is 
much  to  be  said  as  a  method  of  securing"  the  real 
advantages  of  profit  sharin;^.  Mr.  Garnier  adx'ocates 
it  as  a  method  of  im})ro\in^^  the  condition  of  the 
ai^ricultural  laborer.  The  L;reat  objection  to  pay- 
ments in  kind  is  that  the  reward  is  not  definite 
and,  therefore,  Kaxx's  the  laborer  contiiuu^usly  at 
the  discretion  of  his  emplo\-er.  The  L^oods  recei\'ed 
in  pa}-ment  ma\-  \-ar\'  in  quanlit}'.  cpiality,  and 
\'alue  ;   but  in  the  case  of  produce  pax'ments,  thou;^"h 

the  iKrf<irniaiu-c  of  tlio  work  and  the  uimkctint;  i-f  the  prMhut. 
Shniiiil  the  ''cut"  i)f  a  small  opL-iMtor,  or  salii.-niitractr)i-,  lie  lu-M  up  in 
the  siiiallrr  streams  and  tril>utaries  he  is  Ljenerallv  paid  by  mean^iif  a 
dued/ill  ])a_\-aMe  next  season  when  the  liunher  arris'es  at  the  market  or 
wlu'U  his  lait  L;ets  cut  into  the  main  stream  ;  and  presumahl}-  he  often 
pays  his  hands  for  their  winter's  work  in  tlie  same  fashimi.  Qu:  ■•cc 
liruinur,  p.  I  191  •. 

*  O'lt.iri.'  /■'.:■!.::  )h-:\  ]).  TiSs_  'Idiese  due-hilK  are  not  scrip  rei^u- 
larly  issued  hut  nntes  nf  hand  which  it  is  ^aid  are  not  always  redeemed 
when  they  fall  due.  Ontario  /!n)i\iu  rf  S/,:'ijf:cs  A'.rci  t.  i"^5,  \\ . . 
p.  S.  'Idns  practice  has  with  the  truck  system  practically  disap- 
peared. 


TJie  Bargaift  Theory  of  Wages. 


the  value  is  not  definite,  the  quantity  always  is,  and 
the  quality  is  ascertainable.  The  variations  in  value, 
moreover,  are  determined,  not  by  the  will  of  the 
employer,  but  by  the  forces  of  the  market,"  "  I 
would  at  any  rate  suggest,"  he  says,  "  that  there 
should  be  less  cash  and  more  flour  in  the  wages  of 
each  Saturday  night  "  ;  and  he  quotes  with  approval 
from  the  Jour}ial  R.  A.  S.  E,,  the  following 
passage : 

"  One  very  obvious  benefit  arising  to  the  hind  from 
this  mode  of  paying  in  kind,  besides  that  of  having  a 
store  of  wholesome  food  always  at  command,  which  has 
not  been  taxed  with  the  jirofits  of  intermediate  agents,  is 
the  absence  of  all  temptation  which  the  receipt  of  weekly 
wages,  and  the  necessity  of  resorting  to  a  town  or  village 
to  buy  i)rovisions,  held  out  of  spending  in  the  ale-house 
some  part  of  the  money  which  ought  to  provide  for  the 
wants  of  the  family."     .     .     .* 

In  so  far  as  produce  wages  arc  definite,  the  system 
is  advantageous  to  all  concerned,  but  especially  so 
to  the  wage  earner,  owing  to  the  great  saving  on  the 
profits  of  middlemen ;  t  but  it  is  doubtful  whether 

*  Garnicr  : — Ainiah  of  the  British  Peasantry^  p.  411.  As  he 
points  out  (p.  4T0)  the  good  in  payments  in  kind  was  abolished  Ijy  the 
English  Act  of  iSSy  while  the  bad  was  practically  retained.  Intoxi- 
cating liquors  may  not  legally  be  given  in  payment  of  wages  ;  but  the 
emplover  may  still  do  so  by  calling  it  a  gift. 

f  The  system  of  vtctaycr  farming  which  is  practiced  largely  in  some 
of  the  older  of  the  United  States  may  be  regarded  either  as  a  system 
of  produce  rents  or  of  iiroduce  wages.  The  disinclination  of  the  de- 
scendants of  the  original  settlers  to  engage  in  farm  work  and  their 
natural  exodus  to  the  cities  and  the  professions  have  rendered   them 


Prodidi'  li'rf<^(S. 


289 


these  adv.uitai^es  offset  the  (h'sacKaiitac^es  which 
arise  in  a  [)eri<)(l  wlicn  waives  are  faUiiiL;.  W'ac^es 
which  are  paid,  in  whole  or  in  part,  in  L;oods,  are 
subject  to  unreco<^ni/.ed  fluctuations  with  the  le\'el 
of  prices.  Thus  the  wa;^es  of  lumbermen  in  Can- 
ada, and  domestic  servants  e\'erywhere,  have  either 
fallen,  or  not  risen  so  far  as  at  first  appears,  because 
board  is  includeil  in  their  pa}'  and  the  prices  of  most 
of  the  articles  they  consume  ha\'e  fallen,  althoui;]i 
the  increased  \-ariety  and  the  improvement  in  the 
qualit}-  t)f  the  board  provided  may  restorethebalance. 
The  truck  s\'stem  is  the  outstanding;  form  (jf  the 
payment  of  wages  in  kind  and  is  still  prevalent  in 
many  districts.  It  has  disappeared,  indeed,  at  all 
the  industrial  centres  and  the  practice  is  confined  to 
backward  districts,  where  banking  facilities  are  poor, 

un  willing;  ( ir  unalile  to  CDiUiime  cultivating;  the  oM  homestead.  Labor 
is  too  lic.ir  to  allow  the  farm  to  he  cultivated  entirely  hy  hired  lahor  ; 
and  it  is  difticult  to  dispose  of  the  faiin,  apart  fiom  sentimental  rea- 
son^,  on  advantaL;eiuis  terms,  sometimes  on  any  terms.  At  the  same 
time  there  has  heen  an  immiL;rati<>n  of  l-'.uropean  farmers  without 
capital.  The  sy^iem  of  farmiuL;  hy  'halves'  or  '  tiiird^  '  which  has 
been  developed  is  as  natural  an  outcome  of  these  circam^tances  as  the 
stock  and  farm  leases  of  tlie  15th  (_'entury  were  of  the  conditions  pro- 
duced by  the  r>Iack  death.  The  owner  supi>lies  the  farm,  the  stock, 
and  sometimes  even  the  implements,  and  the  farmer  pavs  one  half,  or 
two  thirds,  of  the  ])roduce  to  the  owner,  accnrdin*:;  to  the  amount  of 
capital  supplied.  I  n  the  Maritime  Provinces  of  ('anada  where  the 
same  ai;i"icaltural  and  uncial  conditions  prevail  the  ■■'.■;'A;i  :V  sv-tem  has 
n.'t  been  developed  m^iu^  to  the  absence  of  a  fi'rei_L;n  element  in  th.e 
'pnp.ubuion  accu-tomed  to  intensive  farmiiiL;.  In  New  Ih'un^wick, 
hi>\se\er.  the  hay  h,irve--t  is  nfteii  lait  and  pri\-ate  garden-,  are  occa- 
si";ia;ly  cultivated  en  thi-  s}-'-lem.  In  ihi-  case  we  have  a  system  uf 
produce  wai;cs  rather  than  uf  produce  rents. 


2(jo  TJic  Bargain  TJieory  of  Wages. 


and  labor  unorganized  and  ignorant,  and  to  those 
industries  which,  depending  on  the  season,  involve 
irregular  employment  and  proportionally  large  capi- 
tal. The  effect  of  this  method  of  industrial  remuner- 
ation was  characterized  in  the  report  of  the  Canadian 
Labor  Commission  as  always  amounting  to  a  sweated 
wage ;  and  in  its  worst  form,  as  it  has  existed  in  many 
places,  it  has  resulted,  as  was  epigrammatically  said 
of  it  in  Newfoundland,  in  the  laborer  being  not  paid 
in  "  part  goods,  part  cash,"  but  in  "  part  goods, 
part  trash."  Frequently  the  laborer,  where  this 
system  is  in  force,  has  received  no  part  of  his  wages 
in  cash.  By  means  of  deferred  payments  and  irreg- 
ular employment,  the  worker  gets  involved  in  debt  at 
the  company  store,  and  then  he  has  practically  ceased 
to  be  his  own  master.  Those  \\\\o  are  once  in  the 
toils  of  the  system  are  seldom  able  to  work  their  way 
out  again  ;  and  the  more  deeply  they  are  involved, 
the  more  subject  are  they  to  petty  t\'rannies  at  the 
hands  of  the  subordinate  officials  of  their  employers. 
The  salesmen  in  these  stores  frequently  carry  side 
lines  of  goods  which  they  practically  fcrrce  '"^  upon  un- 
willing but  helpless  customers,  because  they  control 

*  "  lUit  there  is  anotlicr  evil  wliich  we  learn  in  connection  with 
this  system.  At  some  comjiany  stores  in  this  county  the  managers, 
or  clerks,  carry  side  lines  of  goods,  usually  jewelry,  which  they  sell 
to  men  who  have  emjiloyment  around  tlie  works  ;  and  in  one  instance, 
it  has  been  told  us  that  a  workman  who  had  purchased  a  $15  flUed- 
case  watch  for  the  motlerate  sum  of  S35  .  .  .  went  and  asked 
for  an  order  to  get  S5  in  cash  at  the  office  of  the  mine.  '  Ves,'  was 
the  reply,  'if  you  give  me  %\  on  that  watch  you  bought  from  me  last 
month.'" — 'J'lu-  Island  KiporU-y  ((^:\Y^ii  Breton),  Nov.  ti,  1896. 


'■'Tart  Goods ^  Part  Trash.'' 


Kjl 


the  avenues  of  emj)lo\-nient.  Tlie  object  of  those 
wiio  practise  the  s^vsteni  in  its  most  objectiona!)le 
forni  is  to  control  the  ex[)enditure  of  their  laborers 
for  the  sake  of  the  profits,  lei^itiniate  or  not,  of  the 
retail  business;  and  the  laborer  is  seldom  allowed  t*) 
carry  away  any  {lai't  of  his  earnint^s  in  cash.  In 
many  cases,  the  onl\'  \\'a\'  in  \vhich  ready  money 
can  be  obtained  is  b\-  resellini;'  the  c,^of-)ds  obtained 
at  the  stores;  and  there  is  a  profitable  business, 
mainl}-  in  the  hands  of  the  saloond<;eepers,  of  buyiuLj 
from  the  laborers  the  articles  the}-  ha\'e  obtained  at 
the  stores.  ''•  This  is  not  infrecpiently  the  only 
method  in  which  the  goods  reciuired  can  be  ob- 
tained, for  when  the  goods  asked  for  arc  not  in 
stock,  the  intending  buyer  has  to  do  ^^•ithout,  ha\-ing 
neither  the  cash  nor  the  courage  to  seek  else\\-here.+ 
The  problem  how  far  the  payment  of  wages  in 
goods  obtained  at  these  stores  curtails  the  utilit\'  ()f 


*  A  valued  corrcspninlcnt,  Mr.  C.  Ocliiltrcc  Mcl'onalcl,  of  Port 
Moricn,  ("ape  ISrcti  III.  wlio  lias  Ljiveii  nic  nuicli  iiifuriiiatioii  regard- 
iiii;  the  workini;  of  the  truck  .system  in  Cape  llretou,  informs  me  that 
there  were  lately  auetioneii  off  liy  a  ilrink-selkr  at  tilace  Hay,  C.  11., 
103"^  toljaceo  pipe>,  which  had  hccii  taken  fr^iui  tlie  miners  in  e\cl;ani;e 
for  drinks — the  aiutiMp  hein;^  tlie  nictliod  of  reali/in::;  casli  mi  the 
trar;sacti;in.  l''re(r,;ei;tly,  in  the  same  ilistriet,  there  are  a'.u:ti<ins — 
sometimes  several  in  the  co;;i-e<it  a  week — of  t^onds  ^uch  as  cl-thinL^ 
and  i^roceries.  which  have  kcii  o!it, lined  at  ti;e  s:orc- and  exchanL;cd 
for  drink.  'Idle  pin!it-~()f  tlds  1  lU-im  >->  are  >  i  lari^e  that  many  saloi  m- 
keepers  have  hecn  attracted  to  the  district. 

j;  C:!i.\!.!'!(!>!  I.,V'''-  C':'"/.,  .)':'  /  •  r/n;  •  Trfr ':  /\::j,i::c.  y.  4'  7,  It  is 
1)V  no  nie.ui^  alua\-^  the  c:i-e  thai  th'.-  C'lmpany  st'ircs  are  inferior  to 
outride  >!"re--.  and  many  if  tlicin  ,ire  >  i'i  t'  cirn'  a~  Kir::!-  a  line  '  d' 
S;.':>ds,  and  at  a-  rea^oiialile  price-.  The  li-n.  K-ii.  I  iruMTin 'i,.i. 
for  ei'diteen  vcar--hc.c'.  ,.|  tlic  ndncr-' 1 'rcvd  a' i^  ci  in  N(i\a  Sccitia,  ii'- 


292  TJic  Bargain  Theory  of  ]Vagcs. 


the  reward  depends,  largely,  though  not  altogether, 
on  the  scale  of  prices.  There  is  a  certain  exaltation 
in  the  sense  of  freedom  and  independence  which 
comes  from  the  consciousness  of  possessing  money 
in  the  pocket  which  that  man  does  not  experience 
the  payment  of  whose  wages  is  simply  a  matter  of 
bookkeeping,  no  matter  how  reasonable  the  prices 
in  these  company  stores  may  be.  A  priori  it  might 
almost  be  argued  that  the  existence  of  a  practical 
monopoly  will  sooner  or  later  lead  to  a  higher  scale 
of  prices;  and  the  facts  seem  to  bear  out  this  con- 
tention. I  have  accumulated  a  good  deal  of  evidence 
on  this  point,  but  the  following  table  is  more  com- 
prchensi\-e  than  the  statements  of  any  of  my  corre- 
spondents, and  is,  moreover,  taken  from  the  public 

forms  me  that  the  renewed  outcry  against  the  truck  system  in  that  prov- 
ince during  the  last  two  years  has  come  from  the  storekeepers  rather 
tlian  from  the  miners.  The  coal  fields  of  Nova  Scotia  are  now  con- 
trolled by  the  Dominion  Coal  Co.  ;  and  under  new  management  the 
old  objectionable  features  of  the  system  have  disappeared,  the  com- 
pany stores  now  keeping  a  larger  variety  and  selling  superior  goods 
at  lower  prices  than  the  retail  shoplccepers  can  afford  to  do  ;  and  the 
result  has  been  an  agitation  on  the  part  of  the  storekeepeis  against  the 
system.  Mr.  Drunimond's  contention  is  in  part  bijrneout  by  the  fact 
that  the  most  emjihatic  denunciation  of  the  system  is  contained  in 
the  following  resolutions,  adojited  Dec.  21,  i8g6,  by  the  Sydney,  C. 
B.,  Board  of  Trade,  /.  «■. ,  in  a  small  town,  retail  shopkeejiers  : 

"  Whereas  the  Truck  System  of  {)a}dng  \\'ages  in  goods  is  alarm- 
ingly on  the  increase  in  this  country, 

"And,  whereas  the  sy-tem  is  l)uying  uj)  the  main  avenues  of  wealth 
among  the  ma.-,ses  of  the  jieople,  parabzing  internal  trade  and  invest- 
ing the  wealth  i)roduced  through  mining  in  the  mining  comjianies  to 
the  exclusiiju  of  the  general  jnildic, 

".Viid,  <\  herL-.!.-,,  in  addidon,  jireccdci.i  iu  (ireat  r.ritain  and  the 
United  States  of  North  America  instructs  us  of  the  pernicious  influ- 


Co })ipn rat ii  y  / V ices. 


293 


records  of  the  evidence  of  the  Canadian  Labor  Com- 
mission : 


AKTICLI'. 


PRICK  AT  CdMl'ANY  S 

SIORK. 

I'lniir  1  cr  l)arrcl Sf^J.'-a  .  .  .  . 

Ic:!        "     pnuiul '-"oS  .  .  .  . 

Sii;;ar    "         "       O.cvj  .  .  .  . 

So. I])      "        "       (1.07  and  .S  .  .  .  . 

lUitlcr  "        "       (). 'J2  to  2O  .  .  .  . 

Molasses  pt-r  i^allon 0.50  .  .  .  . 

I'otalocs  pur  hlil o.Si)  .  .  .  . 


I'RICK  AT  OUT- 
SI  I  jK  STiiKK. 

■    $5.='> 

.       (J. 22   to  30 

o.oS 
•      0.05 

0.20 

0.40 
.      0.40  to  45 


The  witness,  on  oath,  asserted  that  tlie  articles  at 
the  outsitle  stores  were  of  the  same  brand  and  of  as 
i;i)i)tl  ([u.iHty  as  those  sokl  at  the  company's  store."" 

enccs  of  the  Truck  Sy>tcin  iiimn  the  social  ]iroL;t"ess  of  a  nation  ;  and 
upon  the  steady  sy-.[Lin  of  ])rodiu'tive  indu^ti)'  of  all  kinds, 

"And,  Vvlieica.i  we  inu.^t  have  national  foret]ii)Ui;hl  and  refuse  to 
sanction  the  monopoly  of  wealth  prmhiced  liyany  indi\idual,  or  com- 
pany of  individuals,  hy  the  supplaiuiiiL;  of  Canadian  currency  hy 
goods  {'  >r  workmen, 

"  ]>e  it  tlierefore  resohed,  that  the  lioard  of  d'rade  draw  the  atten- 
tion (jf  the  ( lovernment  of  Nova  Scotia  to  the  grievous  conddticjns 
existing  and  threatening  to  exist  in  tlie  County  of  Cape  lueton,  owing 
to  the  disappearance  of  money  from  circidatiou  by  the  d'ruck  System, 
and  urge  the  tlovernor.  Council,  and  A>-emMy  of  Nova  Scotia  to 
enact  legislation  forhidding  the  payment  of   wages  in  goods." 

However,  the  i)rote>ts  of  the  nuners,  indii\idually,  and  thro.ugh 
their  a^'^ociation^,  are  too  eniph.alic  to  permit  i>  unreservedly  to 
adopt  Mr.  Mrummond's  \iew,  lie  claims  th:'.t  tlie  evils  of  the  ^}'s- 
lem,  which  were  expo>ed  in  the  evidence  of  tlie  Canadiiui  I.alior 
l.'onimi'->i' 111.  are  th.ings  of  the  pa^t  ;  and  in  tin-  mainland  of  Nova 
Scotia  the  d'ruck  System  has  disappeared.  .Mr.  ()chillree  M.tcilon- 
ald,  writing  from  C'apc  lireton,  iu>i.-t>  that  the  e\idfr.ce  tcd^eii  ten 
yeaiN  since  i>  perfectly  trtie  for  tlie  conditio  ^ns  of  to-day  ;  that,  if  tlicre 
has  keen  aiiv  change,  it  ha^  keen  a  change  for  tlie  wor^e.  not  for  the 
better.  kN'en  regarding  Cape  I'.reton,  the  truth  jirokaMy  lies  in  the 
middle  ketween  tliese  contlicting  statements. 

*  k.il'or  Colli.  Xiid  Scotid  Ezid.iuc,  p.  4(15,  and  see  Xcva  Scotia 
Eiidiiuc,  pdssim. 


294 


TJic  Bargain  Theory  of  Wages. 


The  principal  argument  urged  in  defense  of  the 
practice  is  that,  under  the  actual  conditions  of  winter 
industry  in  Canada,  the  stores  are  a  necessity.  The 
mines  in  Cape  Breton  cannot  be  worked  steadily  the 
year  through  because  the  ports  are  closed  by  the  ice. 
Were  it  not  for  the  willingness  and  the  ability  of  the 
company  to  carry  their  employees  through  the  slack 
winter  season  there  would  be  great  hardship.  The 
outside  shopkeepers  have  neither  the  security  nor 
the  capital  to  permit  them  to  give  six  or  nine  months 
credit.  During  four  months  of  the  year  there  is 
practically  no  employment  in  the  mining  districts 
and  during  that  period  a  debt  will  be  incurred  which 
cannot  be  paid  off  before  the  summer  is  nearly  over. 
However  long  the  credit  the  storekeeper  can  obtain 
from  the  wholesale  merchant  it  is  not  long  enough 
for  him  to  wait  six  or  nine  months  for  payment. 

TABI,E*  SriOWIXG  IRREGULARITY  OF  EMPLOYMENT 
IX  MINING  DISTRICT. 


MINER  S 
NAME. 


TOIAL 

DAYS  IN 

YEAR. 


173 

i83 

207 

Iy2 

204i 

1S9 

173 

195 

155 

164 


z    < 


z  .  ^      - 


^     a 


Z    i    H 


3    24    21 

n    25,21 

17   26  ;  21  j  26   24 


19 

13 

1 3  iS    26  '  21 

19  17    25    21 

17  17 

i3  i3 


26  I  23 

26   2_S 


26   20   2 


24 


23 


16  II 
14  10 

17  II 
17  II 
14  10 


23   17 
19  15 


17   24   21 
16   19   I  ■ 


25 

25   23 

16 

19 

23   19 

14 

2t) 

24   23 

17 

*  Canada  Labor  Coin.     Xoz\i  Scotia  Evidrncc,  p.  464 .    from   the 


The  Truck  System  afid  the  Credit  System.     295 

It  should  be  remembered,  iiioreox-er,  that  many  of 
the  objections  to  the  truck  s)-stem  are  vahtl  also  as 
at^ainst  the  credit  s\-stem  which,  in  (jne  f(jrm  or 
other,  is  an  absokite  necessity  wlien  emph)yment  is 
irrei;ular.  h'or  the  kiborer  it  is  (juite  as  hard  to 
work  his  way  out  of  debt  to  a  pri\-ate  storekeeper, 
and  probably  more  won-yiiiL;  because  the  storekeeper 
has  not  the  same  securit)-  for  his  debt.  The  pri\-ate 
storekce[)er  has  ud  means  of  coercion  and  must, 
tiierefore,  charL^e  hi;^her  [)rices  to  co\'er  bad  debts. 
The  C(~)mpan\-  stores,  as  a  matter  of  fact,  stop  waL;es 
till  the  debt  is  reduced  to  mana^'eable  proportions.-' 
The  effect  of  the  truck  systcMU  of  waives  pa\-ment  on 
the  utility  of  the  reward  under  these  circumstances 
will  be  measured  b\'  the  ditference  between  credit 
prices  and  companv'  store  prices,  and  the  ;_;'reater  or 

cviilencc  nf  C.  H.  Kuijhy.  Supt.  of  (llaco  i;:iy  M  iiiiiij;  (/o.  Itsliwuld 
1)0  >taltjil  lu>\vevi.r  tli.il  in  the  djiiiiioa  of  ni)'  conc^iioii'lciil  Mr.  .Mar- 
(ionalil  t!u-rc  wmiM  ne  im  clitticulty  in  siiiiplyiiiL;  the  wanN  nf  the 
co;inniinit  V  ihiriiii;  the  sLiek  >ea.soii  were  the  C' unpaiiy  si' we^  el'i-~e'i 
aiiil  support-  his  view  by  citing  the  fact  that  when  the  Dominion 
Coal  <'o.,  piirchaseil  the  mine  at  I'orl  Mmicn  ((.'.  I'>.)  tlie  fnrnier 
owner  aliandonci  the  stores  on  the  1st  of  ( October  wliile  the  nc.v  Com- 
pany did  nnt  oi)i'n  tlie  store-  till  the  i>t  of  May  fi'llowin;^'.  There  was 
he  asserts  neither  want  nor  di- tress  in  the  ilistrict  that  winter  more  than 
tliere  had  licen  in  previous  winter-  when  the  stores  were  o'pen— -the 
outside  storekeepers  heini;  quite  able  to  carrv  tlieir  cu-ton^.er-  when 
they  were  no  loiiL^er  subject  to  the  unfair  com;ietiti' m  of  the  cim- 
pany  -tores. 

*  the  N'ova  Scotia  .Act  aijainst  Truck  i<  praciicall}'  a  d.i.-ad  letter 
becau-eit  permit-  cnntraclinL;  <ait,  biequentl)'  the  em]'hiyi,-r  doe- 
\v  it  es'cn  \^n  to  the  trouble  "f  refjuirini;  the  fi  irinal  ord^a-  from  hi-  men 
which  permits  him  to  deduct  the  sl(jrc  bill  from  the  wages  as  they 
are  earned. 


296  TJie  Bargain  Tlicory  of  Wages. 


less  degree  of  personal  freedom  which  the  victims  of 
the  two  systems  reteiin.  The  worker's  wage,  when 
thus  paid,  is  not  sweated  by  the  amount  of  the  profits 
of  the  store ;  for  a  large  part  of  these  profits  is  due  to 
superior  trading  advantages.  The  profits  of  the 
stores  are  without  doubt  very  large ;  and  one  of  my 
correspondents  affirms  that  the  mine  in  his  district 
is  run  for  the  store  profits.  The  Dominion  Coal 
Company  was  offered,  it  was  said,  one  hundred  and 
fifty  thousand  dollars  for  the  right  to  run  their 
stores;  and  however  philanthropic  the  company 
might  be,  men  do  not  go  into  the  market  to  pur- 
chase charitable  organizations.  The  defenders  of 
the  system  generally  protest  too  much  about  the 
purity  of  their  motives.  There  is  nothing  disgrace- 
ful in  a  company  trying  to  add  to  its  ordinary  profits 
the  profits  of  retail  shopkeeping ;  the  disgrace  lies 
in  the  abuse  of  the  position  which  the  employer 
occupies. 

Of  the  two  important  elements  Avhich  form  the 
lower  limit  of  wages  the  methods  of  industrial  re- 
muneration has  the  greatest  influence  on  the  utility 
of  the  reward.  Less  directly,  the  disutility  of  labor 
may  be  increased  or  diminished  by  the  method  of 
payment  because  the  disutility  is  more  than  the 
physical  energy  expended.  With  cash  payments 
the  moral  elements  which  enter  into  the  sum  of  dis- 
utilities are  likely  to  be  reduced  to  a  minimum,  for 
the  laborer  in  this  way  obtains  the  maximum  of 
personal  freedom.  With  truck  pa3nTients  the  dis- 
utility is  increased  and  the  utility  of  the  reward  is 


Effect  on  tlic  Employer  s  Estimate.  297 


decreased;  but  the  riL;htin;4-  strength  of  the  laborer 
is  so  reduced  by  the  system  that  he  is  able  to  offer 
little  effective  resistance  to  the  lowering  of  the 
lower  limit  of  wages.  Practically  the  methods  of 
remuneration  exercise  little  influence  in  raising,  but 
may  exercise  considerable  influence  in  reducing, 
the  lower  limit,  thus  rendering  an  actual  lower  wage 
possible. 

The  chief  elements  of  the  upper  limit — the  em- 
ph^yer's  estimate — may  be  affected  by  the  method 
of  industrial  remuneration.  The  efficiency  of  the 
laborer  may  be  increased  or  diminished,  mainly  by 
the  effect  on  the  moral  conditions  of  efficiency;  and 
the  wages  fund  ma)-  be  augmented. 

The  output  of  labor  is  not  a  mere  question  of 
strength  and  knowledge.  Willingness  and  hopeful- 
ness and  the  disposition  to  do  one's  best  are  almost 
as  important  as  plu'sical  and  intellectual  cpialities; 
and  these  moral  (qualities  are  peculiarly  liable  to  be 
influenced  by  the  manner  in  which  the  wages  are 
paid.  If  the  laborer  is  paid  prompth',  in  full  and  in 
cash,  he  is  much  more  likel}'  to  do  his  best  than 
when  his  wages  are  curtailed  I)}'  all  sorts  of  petty 
exactions  and  his  use  of  them  restricted  by  all  sorts 
of  conditions. 

Profit  sharing  and  ])iece  work  tend,  directly  and 
indirectly,  to  raise  tlie  efficienc\-  of  the  indix'iLlual 
and,  gener.d!}-  also,  of  all  in  the  establishment,  and 
thus  tend  to  ]K-rmit  a  higher  wage  to  be  paid.  Not 
only  are  the  expenses  of  management  and  super- 
\ision  decreased,  while  there  i.-^  less  waste  of  material, 


298  TJic  Bargain  Theory  of  Wages. 


but  the  hope  of  greater  gains  acts  as  a  powerful  in- 
centive to  greater  exertion.  Workers  paid  by  these 
methods  reahze,  more  or  less,  that  they  are  being 
treated  with  justice  and  consideration,  and  they  are 
less  likely  than  those  on  time  wages  to  be  eye  ser- 
vants merely. 

When  wages  are  paid  in  cash,  any  feeling  of  resent- 
ment which  the  conditions  of  labor  may  have  caused, 
generally  disappears  when  the  wages  are  paid,  un- 
less the  wages  are  ver)-  inadequate;  but  when  the 
control  of  the  employer  continues  till  the  last  penny 
earned  has  been  expended  the  laborer  continues  to 
feel  his  economic  dependence  and  to  feel  that  there 
is  no  part  of  his  life  which  he  can  call  his  own.  This 
naturall}-  leads  to  inefficienc\%  because  it  tempts  the 
laborer  to  try  to  get  "  even  "  in  some  way.  Pa}'- 
ment  of  wages  in  truck  or  store  orders,  or  at  long 
intervals,  and  then  not  up  to  date,  is  apt  to  create 
a  sense  of  irritation  which  materially  reduces  effi- 
ciency. Under  the  extrcnie  forms  of  the  truck  sys- 
tem, where  the  laborer  is  convinced  of  the  inevit- 
ableness  of  the  t}-ranny  and  the  injustice,  a  premium 
is,  in  effect,  placed  upon  idleness  and  thriftlessness. 
The  laborer  who  owes  the  company  a  large  sum 
knows  that  work  is  assured  to  him  whenever  work- 
is  going,  not  because  he  is  a  good  workman,  but  be- 
cause the  company  iiaturally  desires  to  collect  part 
of  what  he  o\\"es  them.  It  is  their  interest  to  find 
him  \V()rk.  He  belie\'es  that  he  has  been  cheated 
b}'  higher  prices  and  thinks  that  his  real  is  not  half 
his  nominal  indebtedness;  and  the  result  is  that  he 


The  Wcvzcs  Fund. 


299 


tries  to  c^ct  even  with  his  employers  b}'  cheatiiifj 
them  with  (hshonest  and  scampetl  work.  I'Lven 
should  he  remain  honest,  the  incenti\-e  u{  hope  has 
tlisappeared.  The  most  efficient  workmen  are  dis- 
couraL;ed  b\'  the  s\-stem.  for  the}-  (piickl}-  learn  that 
not  efficienc)',  l)ut  indebtedness  at  the  store,  is  the 
l)e-.t  claim  for  work  when  employment  is  scarce. 
l'a}-ment  of  wa^'es  in  kind,  tends  not  onl\'  to  reduce 
efl'icienc}',  but  also  to  destro}'  those  cpialities  which 
promote  efficiency  and  to  encourage  habits  which 
promote  inefficienc}*. 

The  wai^^es  funtl,  the  resources  of  the  employer  for 
the  pa\-ment  of  wages,  is  directl)-  affected  b}'  the 
methods  of  remuneration.  The  j)a\'ment  of  wages 
in  cash  at  the  end  of  each  week  recpiires  a  large 
amount  of  capital,  a  larger  amount  than  is  required 
l)y  any  other  method  of  remuneration  to  pay  the 
same  wages.  Payment  in  kind  means  a  large  econ- 
om\-  of  capital  and  allows  a  lai'ger  business  to  be 
done  on  a  gi\-en  capital.  It  reduces  pa\-ment  almost 
entirel}-  to  a  matter  of  bookkeei)ing,  and  by  analog)- 
might  l)e  called  the  clearing-house  sx'stem  applied 
to  wage  ]xiyments.  Theoretically,  it  niight  be  said 
that  the  truck  s\-stem  would  lead  to  larger  wages 
because  the  empIo\'er  commands  a  larger  ca})ital. 
The  empl(i}-er  is  able  to  augment  his  re-^ources  b\" 
all  the  long  credit  he  can  command  fi'om  the  whole- 
sale sup[)l\-  houses;  and  ma\-  be  al)le  to  maj'ket  a 
hn'ge  part  of  his  output  befoi'e  tlic-^e  oijligalions 
ha\-e  to  be  met:  anil  not  onl\-  is  the  capital  thus 
augmented,  but  additional  profits  are  earned  on  the 


300  TJie  Bargain  TJicory  of  Wages. 


whole  of  it.  This  holds  also  of  deferred  payments 
and  of  payments  by  the  month  or  the  season  instead 
of  by  the  week.  In  many  instances  the  reasons 
which  are  offered  in  defense  of  this  practice,  against 
which  the  laborer  protests,  when  stripped  of  their 
philanthropic  and  paternalist  pretence,  amount  sim- 
ply to  this,  that  a  great  saving  in  capital  is  thus 
secured.  There  is  not  only  the  saving  in  office  ex- 
penses when  the  pay  sheets  are  made  up  at  leisure 
once  a  month  instead  of  once  a  week;  there  is  also, 
and  in  the  case  of  large  concerns  this  becomes  a  very 
important  item,  the  sa\-ing  of  the  interest  on  the 
sum  paid  out  in  \\ages.'"  When  part  of  the  pay- 
ment is  withheld  for  some  weeks,  as  in  the  case  of 
employers  who  pay  on  the  20th  of  the  month  up  to 
the  end  of  the  preceding  month,  or  when  part  is  re- 
tained in  the  employer's  hands  to  the  end  of  the 
year,  as,  for  instance,  the  dividends  in  a  profit- 
sharing  scheme,  or  indefinitely — c.  g.,  contributions 
to  a  provident  fund — the  employer  simply  retains 
part  of  the  wages  as  an  unsecured  investment,  and 
practically  compels  his  employees  to  subscribe  to 
the  capital  required  for  his  business. 

Wages,  however,  do  not  necessarily  rise  because 
the  resources  of  the  employer  are  augmented.  The 
wages  fund  is  only  one  factor  in  the  determination 
of  the  upper  limit ;  and  the  emplo\-er  is  under  no 
obligation,  physical  or  moral,  to  pay  out  the  whole 
of  his  funds.  i\n  increased  wages  fund  simply 
means  that  higher  wages  are  possible  without  neces- 

*  Ontario  Bureau  of  Statistics,  Report,  I&36,  iv.,  p.  1 3. 


Truck  System  a  RiidiDicntary  Credit  Listnuiioit.  301 


sitatiiif;^  a  readjustment  of  the  reward  of  the  different 
economic  factors  in  production.  Moreover,  this  pos- 
sibiHty  may  be  at  the  actual  expense  of  the  workers 
themselves.  They  are  made  to  C(jntribute  to  the 
waives  fund  by  exactions  le\-ied  from  tlie  waives  of 
their  past  labor.  They  are  denied  the  ri-^ht  to 
spend  the  contract  [)rice  of  their  labor,  when  and 
where  tlic}-  choose;  and  the  })robability  of  increased 
compensation  in  the  future  depends  on  the  stren_i;th 
of  their  econ()mic  position.  Those  methods,  hr)W- 
c\"er,  A\-hich  increase  the  wao-cs  fund,  tend  to  reduce 
the  lal)orer's  efficienc}'  and  to  weaken  his  })osition 
as  a  bar^'ainer ;  atul  the  possible  good  is  i:^enerall\- 
con\-erted  into  an  actual  e\'il.  The  effect  of  the  truck 
s}'stem  is,  when  the  other  waives  factors  arc  taken 
into  consideration,  to  depress  rather  than  to  raise 
washes. 

In  a  new  countr}-,  where  mc^icy  is  scarce  and 
bankinc^  facilities  rare,  deferred  payments  or  pay- 
n-.ents  in  kind  may  be  a  practical  necessity.  Were 
waives  paiel  in  cash  the\'  would  necessarih'  be  hjw ; 
and  under  these  conditions  e\'en  the  truck  s\-stem 
may  be  a  practical  benefit  to  the  workin;^  classes. 
But  as  the  countr\-  de\"el()ps,  there  is  less  necessity 
for  makin;,^^  u-^e  of  tliis  piamitix-e  credit  instiaiment 
and  the  s\-stem  is  banished  from  the  industrial  cen- 
tres t>)  ih.e  ilistricts  where  bankiuL^  facilitie-^  are  siill 
uni')ro\'ided.  and  to  indu-^tries  tlependent  on  tlie 
seasons,  where  a  lon_L;"  pei'iocl  must  elapse  Ijeforc  the 
])roduct  is  marketed.  Tliei'e  is  sometliin;^;;  st)  mean 
in  the  practice   of  thr(n\in_i;   [)arl    of  the  burtlen  011 


503  TJie  Bar  gam  TJicory  of  Wages. 


the  laborer,  that  so  soon  as  another  means  of  dis- 
tributing HabiHties  over  a  longer  period  is  devised, 
every  firm  which  has  any  sort  of  credit  and  some 
measure  of  self-respect,  abandons  of  its  own  accord 
the  attempt  to  mulct  the  wages  of  its  employees. 
Except  in  the  seasonal  industries,  it  is  practiced 
now  by  the  "  non-profit  "  employers  only — those 
whose  credit  is  bad  and  who  have  a  hard  struggle  to 
maintain  their  position.  One  of  few  surviving  com- 
pany stores  in  the  province  of  New  Brunswick,  out- 
side of  the  lumber  industry,  is  conducted  by  a  firm 
which  has  already  failed  several  times;  and  this  in- 
stance may  be  taken  as  typical  of  the  condition  of 
those  firms  which  retain  the  system  when  banking 
facilities  are  provided.  The  assistance  which  such 
firms  are  able  to  obtain  by  this  method  enables 
them  longer  to  continue  the  struggle  against  their 
more  fortunate  or  more  competent  rivals.  The  de- 
struction of  the  system  by  legislative  interference 
would  be  a  death  blow  to  such  employers ;  though 
it  is  not  possible  to  agree  altogether  with  a  corre- 
spondent of  the  Ontario  Bureau  of  Statistics  in  as- 
serting that  the  abolition  of  the  truck  system  and 
of  deferred  payments  would  place  a  premium  on 
large  industry.  It  would  give  a  certain  advantage 
to  those  who  had  capital  enough  for  the  business 
they  had  undertaken." 

*  Tlie  truck  system,  however,  is  both  effect  and  cause  of  the  scar- 
city of  money.  During  the  recent  agitation  in  Cape  Breton  against 
the  truck  system  it  was  repeatedly  asserted  that  money  is  being  driven 
out  of  circulation  (see  the  petition  of  the  Sydney  Board  of  Trade 


Effect  0)1  tJii  luifi^viiiiiNg  Process.  303 


It  remains  now  to  discuss  the  influence  of  the 
methods  of  remuneration  on  comparatixx'  streni;th 
of  cmpKn'cr  and  emi)Io\'e(l  in  the  \va^r,js  bar<^r;iin 
\\-hich  determines  where  between  the  hmits  actual 
waives  are  fixed.  The  method  of  remuneration  may 
increase  or  decrease  the  mobihty  of  labor.  ma\-  affect 
the  capacity  for  combination  and  collective  bari^ain- 
inf^,  and  may  strengthen  or  Aveaken  the  (general 
character  of  the  laborer. 

The  mt)bility  of  labor  depends  partly  on  the 
knowledi^e  the  laborer  has  of  the  relative  conditions 
of  labor  in  his  own  district  and  elsewhere.  Causes 
which  prevent  him  from  accpiiriuL;',  or  even  render  it 
more  difficult  for  him  to  accpure,  this  knowdedi^e  in- 

alrcaily  ([uotcd)  ;  and  Mr.  Ochiltree  Macdonald  stigmati/es  tlie  ac- 
(liiicseence  of  the  indi\i<lual  in  the  system  as  a  crime  ai;ainst  honest 
currency.  In  many  districts  trade  is  re(hiced  ahiiost  to  t!ie  primitive 
form  of  Ijarter  to  tlie  Ljreat  di>advantaL;e  of  thixe,  farmer^  fur  instance, 
wlio  Iiave  anythinij  to  sell.  If  tlie-^c  contentions  are  true  a  situation 
exists  in  that  di>lri(  t  which  can  be  cured  l>y  legislation  oidy.  enforcing 
tile  payment  of  wages  in  cash  without  anv  pi)'~>il)ility  of  contracting 
out.  A  primitive  and  vicious  credit  s\^tem  seem-  to  have  ohtaiiied 
such  a  hold  on  the  community  that  there  is  no  room  for  the  moic  re- 
lined  credit  instruments  ])rovi(kd  hv  the  hanlNS.  Tt  re']uired  an  eco- 
nonnccatacU'sm  to  o\-crihro\v  the  truck  s\--tem  in  Newfoundland  wh.ich 
had  lieen  laicouraged  hv  an  unsound  haid^ing  system  :  and  the  inter- 
vention of  the  Canadian  hanks  after  the  cri^i-^  of  iS  14  has  rendered 
it  easier  to  make  the  ne(.-essar\-  dep^irture  from  a  sy:,iem  which  had  in- 
volved the  v.diole  coniniunit}'  in  ruin. 

The  close  connection  hetween  an  inadequate  ha:d^ing  system  and 
the  prevalence  of  the  truck  s\-stem  finds  its  l)e-t  ilhr-tration  in  the 
southern  state-  of  the  American  I'nion.  'ihere  the  truck  s_\--.tcm  has 
attained  its  fulle-l  swav  and  there  currency  is  scarcer  and  ha.nking 
facilities  less  freciiient  than  in  any  other  >ection  of  the  country. 


304  The  Bargain  Theory  of  Wages. 


terfcre  with  the  mobihty  of  labor.  Money  wages 
are  the  calculation  form  of  the  reward ;  and  when 
the  reward  is  not  paid  in  money,  it  is  less  easy  for 
him  to  make  the  comparison.  He  may  not  have 
the  knowledge  or  the  skill  to  calculate  what  the 
wages  are  even  in  his  own  district.  Mobility  de- 
pends also  on  freedom  from  restrictions;  and  weekly 
cash  payments  alone  give  the  laborer  full  command 
of  his  resources  and  leave  him  free  to  make  what 
use  he  pleases  of  them.  A  system  of  deferred  pay- 
ments ties  the  laborer  to  the  employment  he  has. 
To  change  he  must  sacrifice  the  deferred  pay.  The 
fact  that  the  participant  in  a  profit-sharing  scheme 
has  no  legal  right  to  claim  a  share  in  the  profits, 
till  the  financial  year  is  complete,  restricts  his  move- 
ments ;  and  the  benefits  of  a  provident  fund  can  be 
obtained  by  those  only  who  remain  permanently  in 
their  present  employment.  When  wages  arc  paid 
at  infrequent  intervals  and  part  of  the  pay  is  re- 
tained in  the  hands  of  the  employer,  the  intention 
frec[uently  is  to  restrict  the  laborer's  freedom  of 
movement.  One  firm  posted  a  notice  in  its  factory 
that  "  persons  lea\'ing  the  service  of  the  company 
without  serving  the  notice  required  shall  forfeit  the 
arrears  of  j)a\'  due  to  them  "  ■•'•  ;  and  thougli  the  action 
would  be  illegal,  and  the  emphnxes  might  know  it 
to  be  so,  the  notice  would  doubtless  ha\'e  the  de- 
sired effect,  owing  to  the  fact  that  it  would  re([uire 
a  costly  suit  at  law  to  force  tlie  empIo\-er  to  pay. 
The  laborer  who  has  arrears  of  pay  in  the  hands  of 

*  Canadian  Labor  (,'omniissioii,  Quebec  Evidence   p.  1301. 


Till'  J\[obility  of  Labor. 


3'^S 


his  employer  has  i;iven  hostages  to  the  extent  of  the 
arrears.  l'^'c(iuentl\',  e\-en  when  the  employer  is 
honest  and  law  -abidini;',  he  will  pa\'  a  wc^rkman  who 
desires  to  lea\e  before  the  monthl}'  [)ay  day  comes 
round  by  means  of  a  due-l)ill  wliich  is  cashed  at  a 
discount.  In  some  cases,  e\-en,  a  deduction  is  made 
from  liis  wa^es  to  pa\'  the  expenses  of  securinc^  a 
new  worknicUi.  ■•■  The  truck  s\-stem  iiu'oh'es  a  still 
i;reater  restriction  of  mobility.  When  a  workman 
has  L;'ot  into  di'bt  at  the  compan\-  store,  his  mobility 
is  practically  ;///  till  he  has  worked  his  wa}'  out; 
and  it  is  said — and  it  is  antc:cedentl\'  probable — that 
the  cc..ii)an\-  officials  endea\'or  to  keej)  him  in  debt 
in  order  to  retain  their  control  over  him. 

'I'rade  -  unionists  ai'c  constant!}-  discussinfj  the 
methods  c^f  remuneration  from  their  point  of  \-iew. 
They  naturalK'  find  the  ideal  method  in  weekl\'  cash 
pa_\-ments.  The\-  contend  that  an\-  other  s\-stem 
leads  to  the  isolation  and  consc([uent  weakness  of 
the  indi\'idual  worker.  The_\'  criticise,  and  if  neces- 
sary, ai^'itate  ai;"ainst,  an\*  method  which  encourag'es 
the  la[)orer  \o>  deal  with  his  em})loycr  directly  and 
in  his  own  strength.      Piece  work  and  profit  shariiii^ 


*  Canadian  T-abcir  Com.,  0)itario  I-'.iiiL  iter .  ]\  iiiyi  : — "  'I'tuy  will 
chari^c  liiin  for  tlic  passa;4c  fuc  of  annther  man  tn  Iirinu.  up  (to  the 
woods)  in  his  jdacc  and  h-l  him  t^o  ;  and  I  iiave  seen  some  cnneeriis 
n>>t  pay  him  at  aih      If  lie  wants  tn  l;o  he  c;'>es  wiihout  any  paynu.-nt.'' 

It  was  ar;.^ued  before  the  I-'n^iish  I.ahor  r(.nimi--ion  that  the  pay- 
ment of  waL:;es  to  sailnrs  at  frequent  inier\"aK  would  increase  the 
ilant^er  of  desertion.  'idle  pre--ent  jiracliee  therefore  in\ol\(.-s,  rea- 
sonaldy  en.ou^h  perhajis,  a  leslrietion  of  the  mobility  of  that  class  of 
worker.s.      Sp)ers:    Lahcy  Question,  p.  200. 


3o6  TJic  Bargain  TJicory  of  Wages. 


both,  they  consider  objectionable  because  in  this 
way  the  laborer  is  tempted  to  be  disloyal  to  his  class 
by  the  prospect  of  extra  rewards  for  himself.  Profit 
sharing  has  indeed  been  explicitly  advocated  "as  a 
method  of  weakening  the  power  of  the  unions. 
They  do  not,  as  has  been  so  often  asserted,  object 
to  the  higher  reward  of  superior  efficiency;  but  they 
dread  the  effect  of  the  stimulus  to  individual  exer- 
tion on  the  solidarity  of  the  working  classes;  and 
they  are  rightly  of  the  opinion  that  the  interests  of 
all  are  best  secured  by  union  and  combination.  To 
deferred  payments  and  the  truck  system  they  offer 
the  most  strenuous  o[)position  because  by  these 
methods  tlie  individual  worker  is  made  to  feel  his 
dependence  on  his  employer.  Weakness  and  de- 
pendence even  more  than  the  desire  for  exceptional 
wages  are  isolating  forces;  and  tlie  objections  of  the 
unions  to  these  methods  is  \'ery  strong. 

In  spite  of  all  that  has  been  said  by  Carlyle  and 
others  against  the  cash  nexus,  there  is  no  reason 
to  doubt  that  it  is  the  systeni  which  promotes  the 
best  interests  of  the  working  classes.  Paternalism 
and  sentimentalism  have  been  discredited  by  the  ex- 
perience (if  generations.  It  is  better  that  the  rela- 
tions between  emj)loyer  and  employed  should  be  on 
a  pure  basis  of  contract  and  that  no  margin  of  in- 
definiteness  should  remain.  What  is  left  to  be 
understood  is  generalK'  left  to  be  misunderstood 
and  interpreted  against  the  interests  of  the  weaker. 
Weekly  cash  payments  are  Iciest  for  the  woiicing 
classes  in  almost  every  way.      The  employee  remains 


Effect  0)1  Lieiural  lii\ 


C/iiiractcr.        307 


his  own  master  when  the  contract  period  is  o\-er  and 
the  emplo\-er  has  no  ri^ht  to  interfere.  Under  the 
truck  system  the  laborer  is  under  continuous  su[)er- 
vision  in  his  home  as  well  as  in  the  workshop;  and 
one  can  understaiul  why  indii;"nant  o[)ponents  of  the 
SN'stem  \vA\v  denounced  it  as  scarcely  disi^aiised 
sla\-ery.  What  is  true  of  the  truck  system  is  true 
also,  to  a  less  dei^ree,  of  c\-ery  method  of  remunera- 
tion which  keeps  the  laborer  dependent  on  his  em- 
plo\-er  after  the  contract  period  has  expired.  This 
continuous  super\-ision  and  subjection  is  not  con- 
duci\'e  to  the  buiklin;^  up  of  strong'  characters;  and 
the  most  disastrous  effect  of  these  methods  is  to 
weaken  the  L;oneral  character  of  the  laborer  as  a 
\\-a;4es  bari^ainer.  Trade-unionism  is  but  a  sul)stitute 
for  character,  and  the  mobilit}'  of  labor  is  a  result  ; 
the  cliaracter  of  tlie  laborer  is  w  hat  tells  in  the  wa;_;es 
bari;"ain — the  deternn'nation  of  where  between  the 
limits  actual  wai;es  shall  be  fixed. 

W'eekl)-  pa\'ments,  accordini;"  to  some  who  practise 
other  methods  of  remuneration,  promote  tlu'ittless- 
ness  and  dissipation  and  pre\'ent  the  accumulation 
of  propi.,'rt\' ;  and  one  witness  before  the  Canadian 
Labor  Commission  ■•■  claimed  that  tlu,-  oiil)- diiU'rence 
l)etween  weekly  and  fortnight  1\-  pa\-meiUs  was  that 
the  men  go  drunk  once  a  week'  in-^ti'ad  of  once  a 
foi'tnight.  On  the  other  hand  the  Ial)oi-(;i-s  strongi\' 
fa\'or  weekl}'  ])a\-ments,  preferring,  it  ma)'  be,  free- 
dom to  com])ulsor\'  sobrietx'   e\'ei"\'   altei'iiate   ."-^atur- 

*  .\','7v/  Si\'/i.:  A'rvi/.-v/r,',  p.  405  ;  ;cc  also  i:iu.,  p.  427,  uiui  .W:.;' 
Z>V'.7/;..ri7V%  /.':/,/(■'.■  r.',  p.  471, 


3o8  TJic  Bargain  Theory  of  Usages. 


day.  They  indignantly  resent  the  insinuation  that 
they  are  not  able  to  manage  their  own  domestic 
afTairs  and  the  miners  of  Cape  Breton  insist  that 
they  are  as  able  to  spend  their  wages  as  wisely  as 
the  workmen  in  Great  Britain  who  must  be  paid  in 
cash.'"' 

The  assumption  that  the  workman  cannot  manage 
his  own  affairs  weakens  his  character;  and  the  effect 
of  the  truck  system,  which  is  sometimes  justified  on 
that  ground,  is  to  destroy  all  self-reliance  and  self- 
respect  and  remove  all  moti\"e  to  honesty  and  effi- 
ciency of  work.  The  truck  system,  b}'  its  injustice, 
makes  the  worker  practise,  and  justify,  all  sorts  of 
underhand  evasions  of  his  contract.  Above  all  it 
promotes  thriftlessness  and  idleness.  The  Hon. 
Robert  Drummond  said  from  his  place  in  the  Legis- 
lati\-e  Council  of  Nox-a  Scotia  that  the  system  was 
an  abomination  and  a  premium  on  l)eggar\' ;  and 
elsewhere  he  declared  that  it  had  a  "  tendency  to 
foster  thoughtlessness  and  beggary."  This  is  the 
natural  effect  of  the  truck  s\-stem  e\'er\-where. 
Those  who  run  bills  at  the  store  are  the  fa\-orites  in 
the  factoi'}'  and  the  mine.  To  encourage  the  others. 
the\-  recei\'e  the  best  places  in  the  mine,  and  dui'ing 
the  slack  season  they  are  gi\-en  what  work'  there  is 
to  be  given  that  they  may  have  an  opportunity  of 
reducing  their  debt  to  the  store.  The  industrious 
and  thrifty  find  that  constantly  the  idle  and  the  dis- 
sipated hax'c  the  preference.  Those  wdio  take  no 
responsibility  for  themseh'es,  but  run  up  bills,  know- 

*  Xc'A^paper  report  of  a  meeting  at  (ilace  Hay,  Nov.  13,  Ij(j6, 


The  Truck  Syston  i)i  Xiicfouiulland.  309 


iiii;"  that  it  is  the  coni[)aii\''s  interest  to  j)r()\-i(lc  thein 
with  work,  are  tlie  fortunate  ones  of  the  coninumity; 
anil  the  whole  conmuinit}'  is  deniorah/.ed  throui;h 
their  intluence. 

The  economic  crisis  in  XeufouncHand  in  i  S94  was 
a  strikinL,^  instance  of  tlie  complete  tlemoralization 
<if  a  whole  cc)mmunity  under  the  ti'uck'  s\-stem.  The 
s\-stem  was  of  old  standini;'.  Nearly  a  hundred 
)'ears  ai;o  the  i^overnor  of  the  island  tried  b\-  an 
edict  to  suppress  it.  It  was  not  destro}-ed,  but, 
on  the  contrary,  tightened  its  grasp  on  the  busi- 
ness of  the  countr\-.  M\'eryonc  deplored  it,  Init  no 
one  coukl  gi\'e  it  up.  It  pi'omoteil  dishonesty  and 
ci'iine  and  uni\'ersal  diistrust  ;  IjLit  it  rL'([ui!'ed  an  eco- 
n'>mic  disaster  to  o\"erthr(^w  it.  I^\-er\-iinc  sulfered 
by  it,  the  worlcmeii  most  of  all.  lie  was  ground 
between  the  uii[)er  and  the  nelher  millstones — the 
fickle  sea  and  the  burden  of  his  long-standing  debts. 
He  could  h;ii'dl}-  call  himself  his  own,  and  many  a 
Xew  ftnmdland  fisherman  p.rts^ed  fi'om  the  cradle  to 
the  gra\'e  withi)ut  e\er  ha\ing  seen  a  piice  of  moiu}-. 
Xo  one  really  ])ronied  b\'  the  -^xstem,  and  lUack 
Mondax',  the  lOlh  of  1  )ece'm!)L-i',  i  Si ^4.  \\  ,is  the  da_\' of 
saI\-.ition  for  the  "  planter"  as  well  as  the  fislier- 
man. 

The  effect  of  the  truck'  s\-slem  on  tlu'  character  of 
the  kd)orer  depeiuls  altogether  on  the  degree  ot 
coercii.)!!  emplo\'ed.  Where  no  compul-^iiMi  is  used, 
conipaiu'  stores  with  tlu:ir  su[)eriiir  trading  facilities 
might  prii\-e  alnii.st  a.~  great  a  benefit  as  the  co- 
oi)t;rati\'e   stores.       it    is   geiK'i'ally   claiuRHl   that    the 


310  The  Bargain  TJicory  of  Wages. 


workman  is  left  free  and  some  employers  prefer  to 
run  the  stores  for  the  benefit  of  the  workmen.  But 
it  is  difficult  to  say  what  is  and  is  not  compulsion. 
Many  witnesses  before  the  Canadian  Labor  Commis- 
sion began  by  denying  that  there  was  any  sort  of 
compulsion  to  deal  in  a  company  store;  and  ended 
by  admitting  that  there  was  discrimination  in  favor 
of  those  who  dealt  there.  The  prospect  of  an  extra 
profit  is  a  sufficient  incentive  for  the  exercise  of  some 
kind  of  coercion.  The  companies,  as  one  man  said 
to  mc,  who  had  experience  in  running  these  stores, 
are  not  in  it  for  their  health,  and  a  member  of  the 
legislature  of  New  I^runswick,  whose  firm  used  to 
run  several  such  stores,  assured  me  that  where  com- 
pulsion in  some  form  is  not  exercised  the  stores  are 
seldom  profitable. 

Compulsion  in  its  most  brutal  form  is  rarely 
exercised  anywhere  now  in  Canada  but  in  the 
shape  of  discrimination  it  still  flourishes  in  Cape 
Breton.  I-'reedom  may  be  absolute  in  name,  but  it 
may  be  little  more  than  freedom  to  starve.  W'hen 
a  storekeeper  is  able  to  place  those  who  are 
not  his  customers  at  a  disadvantage  in  the  com- 
petition for  work  compared  with  those  who  deal 
witli  him  he  can  bring  a  good  deal  of  pressure  to 
bear.  The  evidence  taken  by  the  Canadian  Labor 
Commission  affords  many  instances  of  this  indirect 
compulsion.  Employers  confessed  that  they  did 
prefer  those  who  dealt  at  tlie  store,  that  they  did 
discriminate  in  their  favor,  that  unmarried  men  were 
not  so  likely  to  find  employment  as  married  men 


Methods  of  I)i(liistrial  Rcuumcration.  3 1 1 


with  families  who  dealt  at  the  store.'"  Pressure  cx- 
ercisetl  in  this  form  is  practically  compulsion  ;  and 
few  are  strong-  enoui^h  to  resist  it.  Circumstances 
naturally  determine  what  amount  of  compulsion  can 
be  used.  An  obstinate  man  with  i^reat  social  or 
political  inlluence  ma\-  resist  successful!)'  and  recei\'e 
his  waives  in  c;ish  ;  but  the  L;i'eater  the  necessit\'  of 
the  indi\-idual  the  more  likely  he  is  to  succumb. 

The  truck  sx'stem  (lestro\-s  the  fri'edom  of  the 
laborer;  and  with  his  frc:edom  L^'oes  his  pown^r  of 
resistance.  lie  is  no  long'er  master  of  himself  and 
therefore  there  is  less  hope  that  in  the  trial  of 
strength  which  precedes  the  determination  of  the 
wages  bargain  the  \'ictory  will  lean  to  his  side. 

*  Xova  Scotia  Evidence,  p.  317  ;  A'au  Brniis7i'ick  Evidence,  p. 
407,  et passi)n. 


FINIS. 


INDEX. 


Autonomous  producers,  48-50 
]! 

Banking  systems,  importance  of, 
to  labor,  i  51),  301 ,  302 

Bargain,  wages  :  comparative 
strength  of  bargainers,  i'i2  ; 
strengtli  of  laborers  as  liar- 
gaincrs,  16-I.-173  ;  disabilities 
of  labor,  [60  ;  trade-union- 
isni  as  C(illecti\e  bargaining, 
167,  264-270  ;  substitutes  for 
character  in,   16S-173 

Booth  (Charles),  on  the  organiza- 
tion of  dock  labor,  2u  ;  Li fe 
and  I.ahpr  of  tlir  Poopli,  I'jo, 
215,  219,  220,  244,  247 

Brcntauo,  on  wages  and  output, 
S7,  90,  0)1,  105  ;  reconciliation 
of  economy  of  high  wages  and 
economy  of  low,   107-109 

BiDiu-t  (Mr.),  out-of-work  sta- 
tistics, 239 

C 

Cairnes  (Prof.),  non-competing 
grouji-,  1-2;  (lis}Hj,-able  funcl 
of  jabr.r,   i-<5  ' 

Canadian     Labor     Commission  :     1 
summer  and  v,  inter  wage^,  24  ; 
shorter    hours    and    elfiriencv, 
65  ;   etfi.'Ct    of    inunigration   on     | 


wages,  250  ;  trade-union  mini- 
nniiu  wage,  261)  ;  the  util- 
ity of  reward,  2S3-2S7;  truck 
system  ami  retail  stores,  291- 
2(i3  ;  truck  luicis,  com|iara- 
ti\-e,  2')3  ;  iiregiilarily  <.f  cm- 
])loyinent  in  mines,  2()4,  205  ; 
truck  s\-sten)  and  uMbility, 
305  ;  methods  of  remuneration, 
eflect  of,  on  ecoiuunic  char- 
acter, 307;  truck  system  and 
Com  pulsion.  31  [ 

Canadian  migration,  20.2,  214^ 
2()()  ;  "  e.\o<ius,"  205  ;  restric- 
tions on  movement,  207  ;  (.'i,!-- 
liss  Bill,  208,  note  ;  tenants  and 
owners  (diagram),  210-21;; 
tendency  to  level  wages  up, 
215  ;  nugrati^ui  by  stages, 
220-222  ;  distrilmtion  of  Cana- 
dian inunigiants  in  L'nited 
States,  221,  222  ;  sei'.si'Mial  mi- 
gration, 224-220  ;  h  'ss  of  pojiu- 
l.ition  due  to  emigraiii'ii,  235 

Capital  :  Ricanlo's  delinition,  45  ; 
are  wagi-s  jjaid  out  of?  40,  ;|;- 
(ii)  ;  fuiKti'  in  of,  53  ;  as  in- 
choate wealth  (I'rof.'    r.vj. si^^), 

s'  1 

Capitalist,  iiitention  of.  tlie  de- 
termining fiictcu'  in  wages.  3, 
(  n 

Census  Uej-orls  :  l'nited  .States, 
lot.  io=  ;  British,  203  ;  Cana- 
dian, -IS 


314 


Index. 


Charity,  indiscriminate,  effect  of, 

22 

Claimants  on  the  product,  satis- 
fied according  to  economic 
strength,  123  ;  no  riglit  to  a 
share  of  product  inherent  in 
any,  124  ;  how  affected  by  law 
of  substitution,  125 

Commodities,  demand  for,  and 
demand  for  labor,  66-69 

Competition  in  Wages-Fund 
Theory,  69  ;  accordir.g  to  sec- 
ond version  of  Productivity 
Tlieory,  95 

Concomitant  variations,  method 
of,  applied  to  wages  tliory, 
24-20,  M 

Contribution  of  labor  to  produc- 
tion, not  physical  but  eco- 
n(jmic,  119  ;  confusion  of  ideas 
of  production  and  distribution, 
123,  126 

Co-operation  :  of  factors  in  pro- 
duction, 121,  122  ;  ideal  of, 
150,  note 

Corliss  Bill,  20S,  note 

Corresjjondence  Ijetween  labor 
Cfjnditionsand  wage  theories,  3 

Cost  cjf  production  of  labor,  8  ; 
wages  as  an  element  of,  q  ;  of 
living  and  wages,  24  ;  wage 
and  labor  cost,   105 


D 


Defects  of  tlie  historical  theories 
of  wages,  129-135 

Degradation  :  of  Vv^age  earning, 
^ir.  Sedley  Taylor  on,  150  ;  of 
labor  and  mobiUty,  1S3 

I)cmand  for  connnodities  and  the 
demand  for  labor,  66-69 

Dependence  of  lai:)orer  on  em- 
]>Iiiyer  exaggerated  in  Wages- 
Tund  Theory,  59 

Di^tribulimi  of  product  accord- 
ing to  claims,  not  according  to 
ccMitiiljutions,  123-126 


Disutility  of  labor,  more  realized 
the  less  remote  the  exertion, 
137  ;  makes  labor  a  personal 
commodity,  138 

Domestic  servants  and  mobility, 
I  So  ;  wages  of,  2S9 

Drage  (f]eof.),  trade-unions  and 
mobility,  177,  179 

Drummond  {Wow.  Robt.)  on  op- 
position to  company  stores  in 
No\a  Scotia,  291,  note  ;  effect 
of  truck  system  on  economic 
character,   308 

Dynamic  ]:>rinciple  required  in 
Theory  of  Wages,  109  ;  secured 
directly  or  indirectly,  109 


E 


Economy  of  high  wages  estab- 
lished by  Factory  Acts,  icj2  ; 
of  low  wages  a  natural  infer- 
ence from  .Mercantilism,  103  ; 
of  high  wages  and  of  low 
wages  reconciled,  107-109 

Efficiency  depends  on  mental 
and  UKjral  qualities,  52  ;  higher 
\\ages  and,  62,  83  ;  output  as 
standaril  of,  SS  ;  effect  of 
trades-unions,  263  ;  methods 
of  remuneration,  296 

Emigration  and  trade  mobility, 
191-196  ;  British  Emigrants 
Office  on,  191  ;  Prof.  Mayo- 
Smith,  193  ;  Mr.  Schloss,  195  ; 
Dr.  Cieffchen  on  causes  of, 
227,  233  ;  J.  S.  Mill,  230  ;  the 
balance-sheet  of  emigration, 
227-234  ;  emigration  as  a  na- 
tional investment,  228-231  ; 
effect  of  immigration  on 
natural  increase  of  United 
Stales,  231  ;  gain  l)y  inimigra- 
tion  not  t<)  be  accurately  meas- 
ured, 233  :  deno])ulalion,  234- 
23'i  ;  llriti^h  industr}- and  emi- 
gration, 239;  United  States 
I       industry      and      immigration, 


I)  id  ex.  3  1  5 


230-242    ;     quality     of      cini-  GottLl,  Social  L\^)ulitic)i  of  Labor , 

grants,      243,     244  ;      cmiL,'ra-  250 

tion     and    the    latjor    market,  Cro^s  and  net  returns,   10 

245  ;   imnuL^ration  and  \\aL;es,  Gtiiilon,    suh-isteiice     tlicory    as 

245-253  ;   tlisplaeint;  of   native  nietiic;d    of    rai>iiig    wa^es,    7  ; 

laborers,      240  ;       wages     and  on  family  as  waLje-i-arnini^' unit, 

standard    of    living    of    ininii-  2S  ;   vei'^ioii  of  >ulisistence  the- 

grants,  25U-253  ory,   33-40  ;   on    Walker's   re- 

Einiiloyer's  estimate,   economic,  sidual  theory,  ilG 

153;     includes    two    factors — 

amount     of    product    and    re-  II 

sources     of     eniidi  )\  ir,     I^S  ;  ,,,.,...          ,                 ,      ,      , 

•   .■         •       ,/             1           "  Jlaraw   (Iveir),    tlic    standard  of 

variations  m,  Kji  ;   when   non-  * 


economic,   lAi 
Evolution,     doctrine    apjdietl    to 
wages  theorio,  i  28 


uviul;  and  \','ages,  30 
lired    hihorers   only    considcre( 
in  \Vages-l'"und  'ilieory,  4-^ 


T-       I        /■           /•         1      „    .    JU'l>so)i,  tiade-union  policy,  278 

Lxodus  from  CanatLa,  205,  220-  ,,        ,,   ..      ^         ■       '       ,        ,  -, 

^^^    ^,.  no7ocii,  trade-unions  and  mobil- 

Expeiimeiit.   industrial,  involved  -'     ' -' 

in  first  version  of  proiluctivity  , 
theory,  S3-86 

Income,     national,     wages    paid 

F  out   of,    55  ;     of    society,    who 

disposes  of  it,  ir-, 

Factory    Acts    established    econ-  Indifference     theory    of    wages, 

omy  of  high   wages,   102  ;   un-  Senior  and  lira^sev  on,  103- 

expected    economic    justitica-  InJustria!    revohition,  effects  of, 

"'■"  »'•   i"4  21,    luS  ;    conditions     and    the 

]  amily    the    wage-earning    unit,  sul)sistence    theory,     21;     and 


; i-2t2  ;  t jould  on,  250 


mobility.    1()>) 


Fluctuations    of    industry,    effect        Intelligence    le^piired   for   u>e  of 


of,  on  tiie  standard  ot  comfort. 


inachiner\',    m 


'y  Ireland,      temporary      migration 

I-'rankliu     (F.enj.),   on     artitn  ial  fr..m,    22;;     emigration,    2^,7, 

lower    limit    of    wages,    152  ;  2">q-   dia<''ram  000    241 

on   the   population   of    United       jt^fy    temporary  migration,  224  ; 
States,  230  cau>es     ot      emigration     from, 

2!2:   olijcction  to  immigrar.ts 

from,   251 


G 


I, 


Gamier,   possibility    of  mobility 

mav    reduce    actual    mobility, 

21;;   protluce  pa^'inents,   2^7;  Fabor,  varying  iiiiensities  of,  I  5  ; 

English  truck  >vstem,  2^  ■^,  note  neee>siti<s    of,  _,i);   iint    a    pa~- 

Giffoiint    (l>r.),    agtarinn    causes  sive    factor   in    uaje--   bargain, 

of    emigration,   227;    causes   of  51;     dep^  iii!ei:>t     iit.    en    ein- 

('.erman  endgration,  23^  p.loyrr.  e\:K:2er  !■■.■  1  in  Wag'-- 

Goi:i!:'\    the     mi-represent;;tions  Fund      I  !;■>.:■;.■,  ^-i:     i-;\i'.ri' >■:, 

of  Kicard'i,   17  expeiiditui'e    and    'iemand    fur 


3i6 


Index, 


Lai  )or —  Con  tin  tied. 

labor,  69  ;  the  supply  price  of, 
73  ;  disabilities  of,  Adam  Smith 
on,  75  ;  commodity  with  a  sup- 
ply price,  76  ;  cost  and  wages 
cost,  105  ;  contribution  of,  to 
production,  119-126  ;  tv.o  es- 
timates of  utility  enter  into 
determination  of  value,  135  ; 
disutility  of,  and  remoteness  of 
exertion,  137  ;  disutility  makes 
a  personal  commodity,  138; 
value  of,  determined  between 
two  estimates,  140-144  ;  dis- 
utility of,  increasing  or  de- 
creasing? 14S  ;  positive  and 
negative  disutilities  of,  149 ; 
imjiortance  to,  of  sound  bank- 
ing system,  159  ;  disposable 
fund  of,  1S5-1S9  ;  not  a  sim- 
plified case  of  value,  72,  256, 
257  ;  trade-unions  and  disa- 
bilities of  labor,  265-26S  ; 
methods  of  remuneration  and 
disutility  of,  2S3  ;  methods  of 
remuneration  and  disabilities 
of  labor,  303.  307 

Leciaire,  172,  1S8 

Limits  of  wages,  140-142,  153- 
15S  ;  the  debatable  ground, 
140 ;  to  pass  upper  limit  re- 
quires distributive  readjust- 
ment, 153,  257,  263  ;  eilcct  of 
trade-unionism  on  limits,  263- 
265 

Localization  of  industry,  effect 
on  migration,  209,  223 

M 

Macdonald  (Mr.  C.  O.),  on  truck 
system  in  Cape  Breton,  291  ; 
truck  system  a  crime  against 
honest  cuncncy,  302,  note 

Machinery,  intelligence  lecjuircd 
for  use  of,  TOO 

M allock ,  Labor  and  th-:  Popiilay 
]\':-lfar,\  iOf>  ;  a;)]ilicati(iii  of 
method  of  resitiue,  123 


Mallhus,  influence  of,  on  de- 
velopment of  Wages-Fund 
Theory,  46 

Marginal  laborer,  Gunton  and 
Marshall  on  the,  33-35  ' 

Market  and  natural  wages,  ac- 
cording to  Ricardo,  41 

Ma)-sJiall  (Prof.),  on  marginal 
laborer,  35  ;  Mill's  theory  of 
distribution,  71,  note  ;  trade 
mobility,  161  ;  on  strikes,  280 

McCuUoch,  trade  mobility  and 
wages,  196 

Mercantilism,  influence  of,  on 
wages  theory,  103 

Metayer  system,  in  United 
States,  2S8,  note 

Method  of  concomitant  varia- 
tions, 24,  81-83  ;  of  residues, 
109-119 

Migration  and  emigration,  vol- 
umes compared,  201-203  !  3. 
labor  factor  of  decreasing  im- 
portance, 203-215  ;  British. 
Census  Report,  on,  203,  note  ; 
Prof.  Wilcox  on,  204  ;  Cana- 
dian migration,  205,  206  ; 
modern  restrictions,  207  ;  Cor- 
liss Bill.  208,  note;  causes  of 
decline,  209,  213-215  ;  prop- 
erty owning,  effect  of,  on,  209- 
213;  ]->ossibility  of,  has  levelled 
up  wages,  213  ;  in  Ontario  and 
Quebec,  215  ;  an  economic 
movement,  215;  of  women, 
216  ;  an  adult  movement,  217  ; 
law  of  migration  by  stages, 
218-222  ;  temporary  and  sea- 
sonal, 223-226 

Mill,  recantation  of  the  Wages- 
Fund  Theory,  4  ;  treatment  of 
particular  wages,  44  ;  attitude 
of,  towards  economic  history, 
70  ;  regards  labor  as  the  com- 
modity, 70;  theory  of  distribu- 
tion, I'rof.  Marshall  on,  71, 
note;  (ii-.utility  of  lalior,   149 

^liiiinnnn  of  sub-istt'iice,  phvsio- 
logical  and  industrial,  17;  the 


Index. 


1^7 


standard  of  livint;  as  ininiimiin 
waives,  40 
Mobility  of  labor,  A.  Smitli  on, 
174,  182;  1  )r.  Smart,  175  ; 
Pnif.  t'ainic-s,  182,  05  ;  neces- 
sary [lo^tulatc  of  \\  a^cs-Fund 
'riicory,  177;  traclc-unions 
and,  i77-iS(i;  ethical  objec- 
tions to,  lIo-.\ellon,  I7'j;  trade 
niiibility  and  place  mil  ilily, 
181  ;  trade  nmbility  and  deijia- 
dation  of  labiT,  IS3  ;  ti'udency 
of  place  nioI)ility  to  ]ir(jinote 
trade  mobility,  i>o-ii)();  in- 
fluence of  Industrial  Ivcvolu- 
tion  on,  199,  230 

N 

Necessities    of   the    laborer,    3(), 

_  151,  261) 
Net  return,   does  labor  receive  ? 

12-15 
Niclwlson,  on  ;)rofit-sharing,  luo, 

note  ;  t^n  strikes,  280 

C) 

Ontario:  r)ureau  of  Statistics,  2in, 
2.-^7,  300  ;  migration  trom,  215 

Output,  and  \s"aL;cs,  Urentaim  on, 
S7  ;  as  the  standard  of  ei'l- 
cielicv,  88-'^(i,  arid  wa^es, 
c 'Hiparative  statistic,^  of,  i/i, 
()i  ;  increment  of,  due  tci  labor, 
<)f)  ;  i)roporlion  L,'oii;_L^  tolabnr 
<!iininishiiii^,  ()7-H''i  ;  and 
labor,  Mr.'.Malloch  on,   k  m 

O^'iiership  of  tlie  wages  fun^' 
57-04 

]' 

Piece  work,  trade  union-  and, 
2''()  ;  and  di-utility  of  labnr, 
2^-2  ;  piece  \va;J,eS  in  I'aited 
."-tates,  2-3  ;  etTecl  mi  ef;!- 
ci(_au\',  2'i7-2'i:) 

PositiM,;  of  -li,  bd-rer,  iiidrpen- 
cb'nce  e\.v^^:>'i-atcd  bv  bro  iiic- 
t'vity  1  hc'ir)-,  4  ;    \\  .iges-b  unil 


Theory,     59  ;     contribution  to 

])roductinn,    121 

Pottrr  (.Mi>s  Peatrice),  on  cni- 
]>li>}er's  e-tiniate.  \Ui 

i'r(Hluel  iif  industry  due  to  co- 
oper,itiui,   121-123 

Product  sharing,  Mr.  (larnier  on, 
287-289  ;  metayer  system  in 
United  .States  and  Canada, 
2^8,  nute 

Production  an  extended  ])rocess, 
53  55  ;  contributi'in  of  labor 
to,  not  ]diy--ical  but  economic, 
i 19-120 

Prdductivity  d'heory  and  tlie  in- 
dependence of  labor,  4  ;  t\vo 
versions  (if,  81  ;  the  first  ver- 
si'in  invdhes  an  industrial  ex- 
periment, 83  ;  the  secon<l  ver- 
sion relies  on  competition,  95  ; 
neglects  second  factor  in  em- 
ployer's estimate,   r5"> 

brolit-shaiing,  Prof.  Nicholson 
on,  loo,  note;  attitude  of  ad- 
\ocates  to  wage  system,  150; 
attitude  of  trade-uni.  ini-m  to- 
wards, 201)  ;  and  disutility  of 
labnr,  2-2  ;  eiiecton  elliciency, 
2.)7-299 

I'ropertv    owning    and    mobility, 

2iH)-2  13 

Protective    p(.)licy,    aim    of,    201, 

note 
Public     opinion    as     a    factor    in 

waijes   liarijain,    171 


R 


/\c77'r>;sfriii's  law  of  migration  liy 

Reniuiu-ratidii,    iiii!i;--l!  i,d,  meth- 
ods ..f.    M  :..  (Iiao.   Mli. 


,,  „  1 


■'I .  Ill  economic 
t;u-  r-c,  I  < '  )  -1  i  1  ;  mit  ,is  a 
red  hial  Icif,  110113  ;  profits 
a-  a  re-:  bad  -hare.  113;  in 
!.■■•'  ii'Tci./s  iMpla."  l.il-e  ll.c'iry 
( 'f  I  (■  M'.'  uiic  b'-','  TV.  I  I  -  :  -,inc- 
tioiied   by    Adam   .■^niith,    1 14  ; 


3i8 


Index. 


wages  as  residual,  115  ;  Prof. 
Walker  on  wages  as  residual, 
115-117;  Mr.  Mallock's  ap- 
plication of,  123 

Restrictions  on  mobility,  207, 
20S  ;  Corliss  Bill  and  contract 
labor  law,  208,  note  ;  military, 
238 

Ricardo,  exceptions  to  law  of 
natural  wages,  41  ;  definition 
of  capital,  45  ;  standard,  Mr. 
Conner  explains,  17  ;  on  rent 
and  profits  as  residual,  110-113 

Rosclu)\  on  Wages  Fund,  159 


Schloss,  Methods  of  Industrial 
Reiinincratio>i,  150,  2S1  ;  trade 
mobility,  195 ;  lump-of-work 
fallacy,  2f)3 

Senior  and  the  Factory  Acts, 
102  ;  and  Lord  Brassey,  indif- 
ference theory  of  wages,  103 

Smart  (Dr.),  the  mobility  of  la- 
bor, 176  ;  on  value,  254,  255 

Smith  (Adam),  the  theory  of  dis- 
tribution, 7  ;  criticism  of  sub- 
sistence theory,  23  ;  summer 
and  winter  wages,  23  ;  wages 
paid  out  of  capital,  53  ;  disa- 
bilities of  labor,  73  ;  immo- 
bility of  labor,  175,  182 

Smith  (H.  Llewellyn),  Booth's 
LifeandLabor,  190.  215,   2l'0 

Sriit/i  (Prof.  Mayo-),  see  emigra- 
tion and  migration 

Standard,  of  subsistence  and  the 
principle  of  population,  i3  ;  of 
comfort  and  the  fluctuations  of 
industry,  19  ;  of  efficiency  out- 
]mt  as,  SS-()0 

.'-Substitution,  law  of,  as  effecting 
cLiimants  in  distribution,  123, 
125,  156,  J53 

Summer  and  winter  wages,  in 
Canada,  23,  note  ;  Adam  Smith 
on,  23 


Supply  of  labor  not  determinate, 
47-51  ;  supply  price  of  labor, 
73-76 


Taussig  (Prof.),  on  capital,  56 
Taylor  (Sedley),  the  degradation 

of  the  wage  earner,  150 
Trade-unionism  as  collective  bar- 
gaining,   167,    26S-271 ;    as   a 
substitute  for  character,   168  ; 
fallacy  of  lump  of   work,   89, 

263  ;  effect  on  limits  of  wages, 

264  ;  mainly  a  method  of  bar- 
gaining, 264  ;  object  of  trade- 
union  policy,  267  ;  legal  locus 
standi,  270;  numerical  strength, 
271,  note;  the  problem  of  dis- 
cipline, 272  ;  must  rely  mainly 
on  moral  forces,  274  ;  obstacles 
in  the  way  of  discipline,  275- 
277  ;  cardinal  maxim  of  policy, 
277,  27S  ;  balance-sheet  of  a 
strike,  279  ;  its  ideal  method 
of  remuneration,  305 

Truck  system,  160,  2S9-296  ;  the 
sweated  wage,  290  ;  compara- 
tive prices,  293 ;  and  irregu- 
larity of  employment,  294  ; 
compared  with  credit  system, 
295  ;  and  wages  fund,  299-303; 
and  mobility,  305  ;  effect  on 
economic  character,  303,  311  ; 
and  financial  conditions,  302, 
note,  309 

U 

United  States,  wages  and  the  cost 
of  li\ing,  25  ;  sliare  allotted  to 
labor,  98  ;  law  of  substitution 
in,  125  ;  Benjamin  Franklin  on 
law  of  wages  in,  152  ;  Census 
Report,  ii)4,  195;  Prof,  \^'ilcox 
on  immigration,  204  ;  Cana- 
dian inmiigrants  into,  205,  221  ; 
Corliss  Bill,  2()S,  note  ;  tem- 
porary   immigrants,    224-226  ; 


Index. 


319 


iiiiL^ratidii  anil  natural  rate 
of  increase,  231  ;  inini iteration 
anil  w;!^eN,  'J4  5-231  ;  piece 
w  aL;i'-.  in,  2-^3  ;  metayer  system 
in,  2^S,  note 


\'alue.  llieory  of,    72,   note,   254, 

257  ;   labor  a  C(Jiiiiilicate(l  case, 

72,  2  5 1 ) ,  257 
\  ariations  in   sul)>i>tence  iheoiy, 

f .  ;   in    intensity   of   labor,    i  5  ; 

in  the  employer's  estimate,  i()i 

W 

W'atjjes,  theories,  (levelo]inient  of, 
3;  as  an  element  of  cost,  ()  ; 
a  L^ri'ss  return,  11  ;  and  the  cost 
ol  livini;,  24,  25  ;  of  women,  25  - 
2"^  ;  the  lamily  the  wa^e-earn- 
int;  unit,  27,  251,  252  ;  gener- 
al, and  [)er  head,  42  ;  source  of 
\\aL;es,  45,  4'  ,  53  ''9  ;  paid  out 
of  income,  55,  5b,  and  output, 
lirentano  on,  ^7  ;  and  output, 
comparative  statist  ics,  SS;  econ- 
omy of  hi_;h  and  economy  of 
low,  ii)i-iiis;  tli^.  indiflerence 
theory  of,  103  ;  est  and  labor 
co-t.  105;  dynamic  jirinciple 
thoii_;',it  necrssai-)-  in  tlicoryof, 
ID);  metliod  of  residues  ap- 
jilicd  to  theory  of,  ]i>7-i  K)  ; 
do. -trine  of  evolution  and  criti- 
cis'il  of  tho.iies  of.  rjS  ;  de- 
fects of  the  l,ist>)i-ic  th.eoiies, 
I2')-I35  ;  Mr.  Sedhy  Taylor 
on  (h'_i;rad  ition  in  eai'nini:, 
I  sM  ;  an  incial  low  ei'  limit 
I'',  Heiiiainin  I-'ranklin  on, 
152;  bai'L^aininLi;,  intluence  of 
leL;i^latMn  and  puiilit-  opinion 
on,  117,  1 73  ;  and  trade  mo- 
bibtv,  is;  ;  McCulloch  on, 
1 1/1  ;    levelled    up   by    effect    of 


l)ro]ierty  ownint;,  2fMj-2i3  ;  im- 
proved communications,  213- 
21s  ;  piece  ua-es,  2\i  ;  W.tkly 
(.aynieiits  of.  2.-4  ;  ileferred 
payment  of,  2s6 
\\a_i;es  l-'und  ;  and  Capital,  53-55; 
ownership  of,  57;  ncit  abso- 
lutely li.xed  and  predettrmined, 
(lo-^nj  ;  should  include  credit, 
61  ;  amount  of,  ^5  ;  and  luxu- 
rious expenditures,  (iij  ;  a 
"  /,'\  isehei)  re  servcjir,''  1  :<j  I 
increased  by  some  niethotls  of 
remuneration,  1^9,  297-3i_)3 
\Vaees-lM:nd  'Idieory,  MilV.s"  re- 
cantation of,  4  ;  jiroblem  of, 
43;  formulated  in  tliree  j.ropo- 
sitions,  47,  53,.  ()(j  ;  considers 
hired  labor  only,  4s  ;  a  theory 
mainly  of  the  deniand  for  labor, 
52;  and  competition,  (k)  ; 
criiics  usually  consider  nifiuey 
wa^es  oidy,  79  ;  and  rent  as 
residual  share.  112  ;  a  recon- 
ciliation ot  stdisistcnce  and  pro- 
ductivity theories,  133:  tlie 
fundamental  error  of.  134  ;  liut 
the  most  ailciiuale  of  the  his- 
toric theories,  135  ;  o\er-em- 
phasi/.es  the  setcnd  element  ot 
emplov'er's  estimate.    15^ 

If',!/:-,/-  '(I'rof.),  lesidnarmctlioil 
a]i]died  to  \\ai:;e  theorv.  I  1  5- 
I  I  s  ;  on  mobilitv,  1 74,  iss, 
is<) 

irii/:s  (Mr.  1".),  on  trade-unions. 
27  I ,  mite 

//7.'.-,'\- (  I'rof.),  on  miL^ration.  201 

Women,  waives  of ,  25-2^  ;  nne;r:;- 
tion  of.  2i(i:  iniluence  on  ir.uie- 
unionism.  275 

?/';/.,■■'.'/ iCu'ri 'b  I.  wa:,^i,s  and  cost 
of  liviuL,'  in  Tnited  Mates,  25  ; 
piece  wagei  in    United  States, 


SOUND  MONEY. 

THE  SILVER  SITUATION  IN  THE  UNITED  STATES,     r.y 

F,    W.    TArssu;,    LL.Il.,    J'h.l>.,    I'mfcs-ur  of    I'dliiical  Kcoiujniy  in 

Harvard   University;  aulliur   (if   "  '1  he  Tarilf    History  of  the   United 

StatL>."      (No. 74  in  the  (^ue.-,tioHN  of  the  1  ):iy  Scrie-,. )      ^eeond   l.dilion. 

ls.i.-\  iseil  ami  enkirL;i-il.      J:\o,  eloih  .  ....  •'i^      75 

"We  do  not  lnj-.itate  to  s.iy  th.t  tliis  li'it.k  i';  in  all  respects  a5  ovcell'Mit  as  it  is  f.ppor- 
tunr.  It  is  c\irenH'l>'  cnni  isc  in  st.itciiiLnt.  ami  iicscr\es  to  \>c  read  t.y  tl,e  Ifarned  as  well 
as  by  tlie  iL;ni'rant,  while  the  limes  sliouKl  insure   it   the  u  idest  eiri.uiation." — .\'e7i'  yoi 

CORPORATION  FINANCE.  I'.y  limMAs  U.  (iuKiNi:,  AiMitor  of 
ll;c  .Manhattan  'I'rusl  C-t.  A  Stmlvi-f  the  I'rinciples  ami  Mctho<ls  of 
the  Mana^enie-nt  of  the  l-'inances  of  ( 'i ^iporati' ins  in  the  Unite'!  Slates, 
with  s])ecial  referenee  to  the  valuation  of  eorporatii'ii   seeiirities.      Svo, 

"  The  author's  practical  and  thcnrctic.il  knowlCilLTc  lia?;  cnalJed  Idni  to  prepare  an  in- 
structive book,  use  fid  alike  to  the  student  at  colli  ,;e  .;nd  t!ie  evrry-cla)  man  .f  ;,  if  airs.  He 
writes  In  a  c.  retul,  d.iscriminatin,;  way,  is  conser\ati\c  in  expression  and  \io.vs.  and  d  >cs 
not  aim  at  effects,  luit  presents  his  staten;enls  and  armiments  in  a  plain,  straightforward 
wav.  \\'c  imagine  few  competent  critics  will  take  issue  with  Iiiin  on  any  matcri.d  points 
in  fiis  discussions." — T/u'  I-'iiiancial  C/irom\L\ 

REAL  BI-METALLISM  ;  or,  Trne  Coin  veisus  Kal-e  Coin.  A  I.es- 
son  for  "  t.'oin's  I'inaneial  School."  l!}'  U\"i-;Ki;f  I'  1'.  W'Mf.id.i.i;,  author 
cif  ■■  The  Modern  I. aw  of  Carriers.''  (tjuestion  of  the  1  )a\'  Series,  N'o. 
S4.)     Illustrated.      I'aper,  40  cts.  ;  cloth        .  .  .  •         •■?     75 

"  Mr.  Wheeler  has  a  firm  and  comprehensive  i;rasp  r.f  Ids  subject,  an-I  in  a  few  coin. 
pact  chapters  he  lays  b.are  '  Coin's"  sophistries  aiu!  n'.isstatcments,  .ind  etfcctuaily  demon- 
strates the  folly  and  danger  of  independent  free  silver  coinage  at  the  p)resent  ratio." — 
Cciiuitercia/  Aih'cyiistr-,  Xew  York. 

A  HISTORY  OF  MODERN  BANKS  OF  ISSUE.  With  an  Ac- 
count  of  the  l^coiioniic  Crises  of  the  I'lesent  Century.       V,\-  Cwwu.vs  A. 

CiiN.VNT.       S\o ^  ^  '^s    ,„, 

"We  c.m  only  express  our  hearty  ap]ireei.itio,i  of  t'':c  li-^ok  as  a  wiioi'-  It  is  ex 
tremely  mterestina.  It  cannot  but  be  uscfid,  ..nd  to  us  it  is  very  oheenn  •  \l'r  Con  m-'s 
book.  Irom  be.;innin5to  end,  is  a  pro..f  that  sound  curren.cv  is  evolvedViere-s'irilv  fp'ri 
the  proi;rcssot  an  industrial  and  commend,, 1  peopj,..  We  have  unhesit  itin  -  cnf  dterin'- 
faith  HI  the  pro.^ress  of  the  people  of  onr  country  in  ind-,;stry  and  conane"ree,  and  that 
sound  currency  \m11  thcretroni  be  evolved.    -  .\'.    ]\   J .'>;uj. 

THE  HISTORY  OF  CURRENCY  (1252  to  1894).  Bein;- an  Ac- 
count "I  the  Cold  and  Silver  Monies  and  Monetary  .--taii'lard  ot  lv,.rope 
and  .\nierica  to^etlier  wd;];  an  I^xandnatiou  vi  the  UtTccts  of  (urreiicN' 
a'ad  Exchanoe  riienoniena  on  C'oiiinuTcial  and  X.iti'in.d  rri'L;ris,  and 
Well-F.ein-.      T,y  W.  A..  SilAW  M.  A.      -vo      .  .  .     ;/,/     S ;,    75 

I  he  present  bimetallic  controversy  has  ^i\,n  birtii  to  iiotliin^  more  profi.v.nd  an, I 
C'Muincin.;.  .  .  .  Mr.  Sh.iw's  work  p  :ss,.s..  s  .1  j.fe-m.ment  historiL.d  interest  f.ir  trans- 
cending the  present  battle  of  tlie  st.ir.dards."  — .'»'.   1'.  .V.i:.','i: . 

c.  r.  I'Uiw.vMs  .Nfoxs 

NKW    YORK  AMI  i  ,>\lio\ 


SOUND    MONEY. 

THIRTY  YEARS  OF  AMERICAN  FINANCE.     A  Short  Finan- 

cial  History  of  the  Government  and  People  of  the  United  States  since 
the  Civil  War  1365-1S96.   By  Alex.\nder    Dan.\  Noyes.    i2nio 

SOUND  MONEY  MONOGRAPHS.     V,y   William   C.  Cornweu. 

Pr-.-ident  of  the  City  Bank,  Pniffalo,  author  of  "The  Currency  and  the 

Banking  Law  of  Canada".      8vo    ......  $1  00 

'•  The  author  deals  intelligently  with  the  origin  of  money,  fiat  money  and  legal  tender, 
the  result  of  legal  tender  and  the  remedy,  and  international  oAna^e/'—Bos/cn  Globe. 

MONETARY  PROBLEMS  AND    REFORMS.     By  Charles  H. 

Swan,  Jr.     (Xo.  91  in  Question  of  tlie  Day  Series.)     8vo      .         $     75 

"  Mr.  Swan's  discussion  of  the  subject  is  clear,  concise,  and  sound,  and  constitutes  a 
valuable  addition  to  the  literature  of  the  subject. — St.  Louis  Globe-Detnocrat. 

THE  NATURAL  LAW  OF  MONEY.  The  successive  steps  in  the 
growth  of  Money  traced  from  t!ie  days  of  Barter  to  the  Introduction  of 
t!ie  Modern  Clearing-house,  and  Monetary  Principles  examined  in  their 
relation  to  Past  and  Present  Legislation.  By  WiLLLVM  Brol'gh. 
i2mo,  cloth,  .........         $1  00 

"  The  author's  stj-le  is  clear  and  concise,  and  he  gives  a  great  deal  of  valuable  infor- 
mation well  adapted  to  the  understanding  of  the  general  reader  in  a  brief  compass." — 
Boston  Saitirdity  Eve.  Gazette. 

A  HISTORY  OF  MONEY  AND  PRICES.  Being  an  Liquiry  into 
their  Relations  from  the  Thirteenth  Centurj'  to  the  Present  Time.  By 
J.  SciiuENHOF  ;  auth(jr  of  "The  Economy  of  High  Wages,"  etc. 
(Xo.  85  in  the  Questions  of  the  Day  Series.)     i2mo      .         .         $r   50 

"  Mr.  Schocnhof's  book,  '  Money  and  Prices,' is  a  positive  and  most  valuable  con- 
tribution to  economic  literature  iriaamucli  r-,s  it  supplies,  in  a  ciear  and  popular  manner, 
just  the  information  necessary  for  the  formation  of  correct  opinions  respecting  the  vexed 
problem  of  prices,  and  especially  resijecting  their  relation  to  monetary  changes.  The  ex- 
amination ought  to  be  more  an  essential  of  every  high  educational  systen;." — Da\  id  A. 
Wells. 

PRINCIPLES  AND  PRACTICE  OF  FINANCE.  A  Practical 
Guide  for  Bankers,  Merchants,  and  Lawyers,  togctlier  with  a  ."nummary 
of  the  X'ational  au'l  State  Banlving  Lav\s,  and  the  Legal  Rates  of  In- 
terest, TaLles  of  I'oreign  Coins,  and  a  Cilossary  of  C(jmmercial  and 
Financial  Terms.     By  Edward  Carroll,  Jr.    Svo,  cloth  .         %\  75 

"  Mr.  Carroll's  volume  aims  to  be  a  practical  guide  for  bankers,  merchants,  and  .aw- 
yers,  and  ceri'iniy  C-  ■^i  gi-  c  a  great  (U-al  ('•  information  which  they  ought  to  know.  .  ,  , 
It  is  refresliiiig  to  get  a  Look  on  I'm;. nee  wliieh  is  no't  given  up  to  the  discussion  of  the 
writer's  personal  vices  on  the  current  questions  of  fincmcial  agitation.  .  .  .  These 
sul  jeets  will  soon  f.-.il  to  interest,  fi.r  in  tlie  n  iture  of  things,  they  will  soon  be  settled. 
They  are  too  practical  to  remain  open.  But  Mr.  Carroll's  \olume  will  be  valuable  long 
after  those  matters  lia\e  been  disposed  of.  It  is  v.  ell  written,  and  the  inde.x  makes  it  a 
convenient  book  of  reference." — Cliicago  Intey-Ocaui  . 

G.    P.    PL'TXAM'S  SOXS 

NEW    VOKK  and  LONDON 


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